<PAGE>

================================================================================

                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                AMENDMENT NO. 1 TO
                                   FORM 10-QSB

(Mark One)

[X]      QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
         ACT OF 1934

         For the quarterly period ended: December 31, 2004

                                       OR

[ ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

         For the transition period from ______________ to ______________

                        COMMISSION FILE NUMBER 000-28863

                           MARKLAND TECHNOLOGIES, INC.
             (Exact name of registrant as specified in its charter)

           FLORIDA                                                84-1334434
(STATE OR OTHER JURISDICTION OF                                 (IRS EMPLOYER
INCORPORATION OR ORGANIZATION)                               IDENTIFICATION NO.)

                             #207 - 54 DANBURY ROAD
                              RIDGEFIELD, CT 06877
              (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES AND ZIP CODE)

                                 (203) 894-9700
              (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to filed such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

         As of February 17, 2005, there were 89,818,500 shares of common stock,
$0.0001 par value, of the registrant issued and outstanding.

         Transitional Small Business Disclosure Format (CHECK ONE):
Yes [ ] No [X]

================================================================================


<PAGE>

                           MARKLAND TECHNOLOGIES, INC.
                               Amendment No. 1 to
                                   FORM 10-QSB
                                TABLE OF CONTENTS
                               DECEMBER 31, 2004

                                                                            PAGE
                                                                            ----
PART I.  FINANCIAL INFORMATION:

     Item 1.    Financial Statements (Unaudited)

         Condensed Consolidated Balance Sheet at December 31, 2004...........  2

         Condensed Consolidated Statement of Loss for the Six Months
         Month Ended December 31, 2004.......................................  3

         Condensed Consolidated Statement of Loss for the Three
         Months Ended December 31, 2004 and 2003.............................  4

         Condensed Consolidated Statement of Stockholders' Equity For the
         Six Months Ended December 31, 2004..................................  5

         Condensed Consolidated Statements of Cash Flows for the
         Six Months Ended December 31, 2004 and 2003.........................  8

         Notes to Condensed Consolidated Financial Statements................ 10

     Item 2.    Management's Discussion and Analysis or Plan of Operations... 32

     Item 3.    Controls and Procedures...................................... 42

PART II. OTHER INFORMATION

     Item 1.    Legal Proceedings............................................ 42

     Item 2.    Unregistered Sale of Equity Securities and Use of Proceeds... 43

     Item 3.    Defaults upon senior securities.............................. 44

     Item 4.    Submission of matters to a vote of security holders.......... 44

     Item 5.    Other issues................................................. 44

     Item 6.    Exhibits..................................................... 45

     Signatures ..............................................................53

--------------------------------------------------------------------------------
Statements contained in this Amendment No. 1 to the quarterly report on Form
10-QSB, for the quarter ended December 31, 2004, which are not historical facts
constitute forward-looking statements and are made under the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements involve substantial risks and uncertainties. You can
identify these statements by forward-looking words such as "may", "will",
"expect", "anticipate", "believe", "estimate", "continue", and similar words.
You should read statements that contain these words carefully. All
forward-looking statements included in this Amendment No. 1 to the quarterly
report on Form 10-QSB, for the quarter ended December 31, 2004, are based on
information available to us on the date hereof, and we assume no obligation to
update any such forward-looking statements. Each forward-looking statement
should be read in conjunction with the financial statements and notes thereto in
Part I, Item 1, of this quarterly report and with the information contained in
Item 2 together with Management's Discussion and Analysis or Plan of Operation
contained in our annual report on Form 10-KSB for the year ended June 30, 2004,
as amended on October 20, 2004, including, but not limited to, the section
therein entitled "Risk Factors."


                               Explanatory Note

This Amendment No. 1 to the quarterly report on Form 10-QSB for the quarter
ended December 31, 2004 is being filed to:

1.     Correct a typographical error on the Condensed Consolidated Statement
of Cash Flows for the Six Months Ended December 31, 2004 and 2003 which
incorrectly attributed a non cash charge for debt discount of $41,668 for 2003
to 2004. There is no change to the cash provided by operations for the six
months ended December 31, 2004 or 2003.

2.     Correct typographical errors in Note 3 of the notes to the unaudited
condensed and consolidated financial statements for the six months ended
December 31, 2004 and 2003. The effect of these changes was to increase the
proforma loss for the six months ended December 31,2003 by $104,000 and increase
the net loss per share by $0.02.

3.     Correct an error in Note 9 of the notes to the unaudited condensed and
consolidated financial statements for the six months ended December 31, 2004 and
2003 in the table of outstanding warrants at December 31, 2004 to reflect the
reduction in the exercise price resulting from the December 28th agreement as
described in the financial statements.

4.     Correct other minor typographical and formatting errors.



<PAGE>
<TABLE>

                                    PART I. FINANCIAL INFORMATION

                            MARKLAND TECHNOLOGIES, INC. AND SUBSIDIARIES

                                CONDENSED CONSOLIDATED BALANCE SHEET
                                        AT DECEMBER 31, 2004
                                             (UNAUDITED)


                                               ASSETS

<S>                                                                                 <C>
CURRENT ASSETS:
  Cash                                                                              $  5,660,257
  Accounts receivable                                                                  6,889,398
  Other current assets                                                                   217,085
                                                                                    -------------
        TOTAL CURRENT ASSETS                                                          12,766,740
                                                                                    -------------

PROPERTY AND EQUIPMENT- NET                                                              951,330
                                                                                    -------------
OTHER ASSETS:
  Deferred financing costs, net of accumulated amortization of $789,259                1,040,273
  Amortizable intangible assets, net                                                  13,176,562
  Goodwill                                                                             9,159,513
  Technology rights - Acoustic Core                                                    1,300,000
                                                                                    -------------
      TOTAL OTHER ASSETS                                                              24,676,348
                                                                                    -------------

      TOTAL ASSETS                                                                  $ 38,394,418
                                                                                    =============

                                LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
  Accounts payable                                                                  $  7,155,606
  Accrued expenses and other current liabilities                                       2,181,193
  Convertible secured notes, net of discount of $4,201,803                             2,753,197
  Current portion of long-term debt                                                    2,537,061
                                                                                    -------------
       TOTAL CURRENT LIABILITIES                                                      14,627,057

NON-CURRENT LIABILITIES
  Long-term debt, less current portion and discount of $1,321,160                      7,411,609
                                                                                    -------------
      TOTAL LIABILITIES                                                               22,038,666
                                                                                    -------------
COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
  Series A redeemable convertible preferred stock - no par value;                        300,000
    30,000 authorized, issued and outstanding; liquidation preference
    of $300,000
  Series C 5% cumulative convertible preferred stock - .0001 par value;                       --
    8,000 authorized; 0 issued and outstanding;
  Series D convertible preferred stock - .0001 par value;                                      2
    40,000 authorized; 15,455 issued and outstanding;
    liquidation preference of $15,455,000
  Common stock - .0001 par value; 500,000,000 authorized;                                  5,795
    58,010,095 shares issued and outstanding
  Additional paid-in capital                                                          67,702,285
  Unearned compensation                                                              (22,115,169)
  Accumulated deficit                                                                (29,537,161)
                                                                                    -------------
      TOTAL STOCKHOLDERS' EQUITY                                                      16,355,752
                                                                                    -------------
      TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                    $ 38,394,418
                                                                                    =============
</TABLE>

                        The accompanying notes are an integral part of these
                             condensed consolidated financial statements

                                                 2


<PAGE>
<TABLE>

                            MARKLAND TECHNOLOGIES, INC. AND SUBSIDIARIES

                             CONDENSED CONSOLIDATED STATEMENTS OF LOSS

                        FOR THE SIX MONTHS ENDED DECEMBER 31, 2004 AND 2003
                                            (UNAUDITED)


                                                                       2004                2003
                                                                   -------------      -------------
<S>                                                                <C>                <C>
REVENUES                                                           $ 32,814,528       $  3,563,495

COST OF REVENUES                                                     25,726,725          2,329,581
                                                                   -------------      -------------
GROSS PROFIT                                                          7,087,803          1,233,914
                                                                   -------------      -------------

OPERATING EXPENSES:
  Selling, general and administrative                                 8,728,505          1,136,188
  Research and development                                              110,267                 --
  Amortization of compensatory element of stock issuances for
    selling, general and administrative fees                          2,253,423          1,539,142
  Loss on disposal of property and equipment                            192,986                 --
  Amortization of intangible assets                                     963,985            150,001
                                                                   -------------      -------------
    TOTAL OPERATING EXPENSES                                         12,249,166          2,825,331
                                                                   -------------      -------------

OPERATING LOSS                                                       (5,161,363)        (1,591,417)
                                                                   -------------      -------------

OTHER EXPENSES (INCOME), NET
  Interest expense (including non-cash interest of $3,624,028)        4,107,402            147,728
  Other income, net                                                     (15,552)                --
                                                                   -------------      -------------
    TOTAL OTHER EXPENSES, NET                                         4,091,850            147,728
                                                                   -------------      -------------

NET LOSS                                                             (9,253,213)        (1,739,145)

Deemed Dividend To Preferred Stockholders                                    --            186,250

Preferred Stock Dividend - Series C                                          --            130,540
                                                                   -------------      -------------

NET LOSS APPLICABLE TO COMMON STOCKHOLDERS                         $ (9,253,213)      $ (2,055,935)
                                                                   =============      =============

BASIC AND DILUTED LOSS PER COMMON SHARE:                           $      (0.20)      $      (0.38)
                                                                   =============      =============

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING                 45,380,646          5,463,757
                                                                   =============      =============
</TABLE>

                        The accompanying notes are an integral part of these
                            condensed consolidated financial statements

                                                 3


<PAGE>
<TABLE>

                            MARKLAND TECHNOLOGIES, INC. AND SUBSIDIARIES

                              CONDENSED CONSOLIDATED STATEMENTS OF LOSS

                        FOR THE THREE MONTHS ENDED DECEMBER 31, 2004 AND 2003
                                             (UNAUDITED)


                                                                        2004                2003
                                                                    -------------      -------------
<S>                                                                 <C>                <C>
REVENUES                                                            $ 17,044,677          3,256,771

COST OF REVENUES                                                      13,283,832          2,072,625
                                                                    -------------      -------------
GROSS PROFIT                                                           3,760,845          1,184,146
                                                                    -------------      -------------

OPERATING EXPENSES:
  Selling, general and administrative                                  5,157,465            638,376
  Research and development                                               110,267                 --
  Amortization of compensatory element of stock issuances for
    selling, general and administrative fees                           2,254,566          1,137,162
  Loss on disposal of property and equipment                             169,264                 --
  Amortization of intangible assets                                      481,993            116,667
                                                                    -------------      -------------
    TOTAL OPERATING EXPENSES                                           8,173,555          1,892,205
                                                                    -------------      -------------
OPERATING LOSS                                                        (4,412,710)          (708,059)
                                                                    -------------      -------------

OTHER EXPENSES (INCOME), NET
  Interest expense (including non-cash interest of $3,309,862)         3,604,187            119,150
  Other income, net                                                       (9,705)                --
                                                                    -------------      -------------
    TOTAL OTHER EXPENSES, NET                                          3,594,482            119,150
                                                                    -------------      -------------

NET LOSS                                                              (8,007,192)          (827,209)

Deemed Dividend To Preferred Stockholders                                     --             96,250

Preferred Stock Dividend - Series C                                           --             64,851
                                                                    -------------      -------------
NET LOSS APPLICABLE TO COMMON STOCKHOLDERS                          $ (8,007,192)      $   (988,310)
                                                                    =============      =============

BASIC AND DILUTED LOSS PER COMMON SHARE:                            $      (0.15)      $      (0.16)
                                                                    =============      =============

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING                  52,408,699          6,156,120
                                                                    =============      =============
</TABLE>

                        The accompanying notes are an integral part of these
                             condensed consolidated financial statements

                                                  4


<PAGE>
<TABLE>

                                            MARKLAND TECHNOLOGIES, INC. AND SUBSIDIARIES

                                      CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

                                             FOR THE SIX MONTHS ENDED DECEMBER 31, 2004


                                                                                                                      SERIES C
                                                                                      SERIES A CONVERTIBLE          CONVERTIBLE
                                                              COMMON STOCK               PREFERRED STOCK          PREFERRED STOCK
                                                        ----------------------------------------------------------------------------

                                                           SHARES        AMOUNT         SHARES       AMOUNT        SHARES    AMOUNT
                                                        ----------------------------------------------------------------------------
<S>                                                      <C>           <C>               <C>       <C>               <C>   <C>
Balance - July 1, 2004                                   31,856,793    $    3,180        30,000    $  300,000        --    $   --

Conversion of Series D convertible
  preferred stock into common stock                      15,868,206         1,587            --            --        --        --
Stock, options and warrants issued in connection
   with consulting and employment agreements              7,104,139           710            --            --        --        --
Amortization of employment and
    consulting agreements                                        --            --            --            --        --        --
Stock issued in connection with reset
    rights of private placement investors                   833,333            83            --            --        --        --
Stock issued for services provided in
    connection with acquisition of EOIR                     226,096            23            --            --        --        --
Stock issued in connection with
    legal settlement                                        152,778            15            --            --        --        --
Stock issued in connection with
    warrant conversions                                   1,968,750           197            --            --        --        --
Fair value of warrants and beneficial
    conversion feature on convertible secured notes              --            --            --            --        --        --
Net loss                                                         --            --            --            --        --        --

                                                         -----------   -----------   -----------   -----------   -------   -------
Balance - December 31, 2004                              58,010,095    $    5,795        30,000    $  300,000        --    $   --
                                                         ===========   ===========   ===========   ===========   =======   =======


                                             The accompanying notes are an integral part
                                        of these condensed consolidated financial statements
</TABLE>

                                                                  5


<PAGE>
<TABLE>

                        MARKLAND TECHNOLOGIES, INC. AND SUBSIDIARIES

                  CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

                         FOR THE SIX MONTHS ENDED DECEMBER 31, 2004


                                                  SERIES D CONVERTIBLE          UNEARNED
                                                     PREFERRED STOCK          COMPENSATION
                                             ------------------------------   -------------

                                                 SHARES          AMOUNT          AMOUNT
                                             -------------    -------------   -------------
<S>                                                <C>        <C>             <C>
Balance- July 1, 2004                              22,786     $          2    $(15,176,116)

Conversion of Series D convertible
  preferred stock into common stock                (7,331)              --              --
Stock, options and warrants issued in
  connection with consulting and
  employment agreements                                --               --      (9,111,171)
Amortization of employment and
  consulting agreements                                --               --       2,172,118
Stock issued in connection with reset
  rights of private placement investors                --               --              --
Stock issued for services provided in
  connection with acquisition of EOIR                  --               --              --
Stock issued in connection with
  legal settlement                                     --               --              --
Stock issued in connection with
  warrant conversions                                  --               --              --
Fair value of warrants and beneficial
  conversion feature on convertible
  secured notes                                        --               --              --
Net loss                                               --               --              --
                                             -------------    -------------   -------------
Balance - December 31, 2004                        15,455     $          2    $(22,115,169)
                                             =============    =============   =============
</TABLE>

                    The accompanying notes are an integral part of these
                        condensed consolidated financial statements

                                             6




<PAGE>
<TABLE>

                        MARKLAND TECHNOLOGIES, INC. AND SUBSIDIARIES

                  CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

                         FOR THE SIX MONTHS ENDED DECEMBER 31, 2004


                                               ADDITIONAL                          TOTAL
                                                PAID-IN         ACCUMULATED    STOCKHOLDERS'
                                                CAPITAL           DEFICIT          EQUITY
                                                 AMOUNT           AMOUNT           AMOUNT
                                             -------------    -------------    -------------
<S>                                          <C>              <C>              <C>
Balance - July 1, 2004                       $ 50,864,718     $(20,283,948)    $ 15,707,836

Conversion of Series D convertible
  preferred stock into common stock                (1,587)              --               --
Stock, options and warrants issued in
  connection with consulting and
  employment agreements                         9,307,266               --          196,805
Amortization of employment and
  consulting agreements                                --               --        2,172,118
Stock issued in connection with reset
    rights of private placement investors             (83)              --               --
Stock issued for services in connection
    with acquisition of EOIR                      108,505               --          108,528
Stock issued in connection with
    legal settlement                               70,263               --           70,278
Stock issued in connection with
    warrant conversions                         1,181,053               --        1,181,250
Fair value of warrants and beneficial
    conversion feature on convertible
    secured notes                               6,172,150               --        6,172,150
Net loss                                               --       (9,253,213)      (9,253,213)
                                             -------------    -------------    -------------
 Balance - December 31, 2004                 $ 67,702,285     $(29,537,161)    $ 16,355,752
                                             =============    =============    =============
</TABLE>

                    The accompanying notes are an integral part of these
                         condensed consolidated financial statements

                                              7




<PAGE>
<TABLE>

                             MARKLAND TECHNOLOGIES, INC. AND SUBSIDIARIES

                           CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                         FOR THE SIX MONTHS ENDED DECEMBER 31, 2004 AND 2003
                                             (UNAUDITED)


                                                                           2004              2003
                                                                       ------------      ------------
<S>                                                                    <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES:

  Net loss                                                             $(9,253,213)      $(1,739,145)

    Adjustment to reconcile net loss to net cash provided by
       (used in) operating activities:
      Depreciation and amortization of property and equipment              154,973             2,255
      Amortization of intangible asset                                     963,985           150,001
      Amortization of debt discount                                             --            41,668
      Loss on disposal of equipment                                        192,986                --
      Non-cash issuance of stock for legal settlement                       70,278                --
      Non-cash interest expense                                          3,624,028                --
      Amortization and remeasurement of compensatory stock grants        2,253,423         1,539,142
  Changes in operating assets and liabilities:
      Accounts receivable                                               (1,535,131)       (1,448,988)
      Other current assets                                                  67,985            25,454
      Accounts payable                                                   3,654,365           545,299
      Accrued expenses and other current liabilities                         1,217                --
                                                                       ------------      ------------
        NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES                194,896          (884,314)
                                                                       ------------      ------------

CASH USED IN INVESTING ACTIVITIES:
    Proceeds from sale of property and equipment                            28,607                --
    Additional transaction costs relating to purchase of EOIR              (69,111)               --
    Purchase of ASI assets                                                      --           (85,000)
    Purchase of STR                                                             --          (784,170)
    Purchase of property and equipment                                    (251,239)               --
                                                                       ------------      ------------
        NET CASH USED IN INVESTING ACTIVITIES                             (291,743)         (869,170)
                                                                       ------------      ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from sale of preferred stock                                         --           745,000
  Proceeds from exercise of warrants                                     1,181,250                --
  Proceeds from convertible secured notes (net)                          4,541,342                --
  Proceeds from notes payable                                                   --         1,400,000
  Repayments of notes payable                                             (466,576)         (278,004)
  Repayments of credit line                                               (600,000)               --
                                                                       ------------      ------------
        NET CASH PROVIDED BY FINANCING ACTIVITIES                        4,656,016         1,866,996
                                                                       ------------      ------------

NET INCREASE IN CASH                                                     4,559,169           113,512

CASH - BEGINING                                                          1,101,088             5,465
                                                                       ------------      ------------
CASH - ENDING                                                          $ 5,660,257       $   118,977
                                                                       ============      ============

                         The accompanying notes are an integral part of these
                             condensed consolidated financial statements
</TABLE>

                                                  8

<PAGE>
<TABLE>

                        MARKLAND TECHNOLOGIES, INC. AND SUBSIDIARIES

                       CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                     SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

                     FOR THE SIX MONTHS ENDED DECEMBER 31, 2004 AND 2003
                                         (UNAUDITED)


                                                                     2004            2003
                                                                 -----------     -----------
<S>                                                              <C>             <C>
Cash paid during the periods for:
  Interest                                                       $  347,988      $       --
                                                                 -----------     -----------

  Taxes                                                          $       --      $       --
                                                                 -----------     -----------
Non-cash investing and financing activities:

  Conversion of accounts payable into common stock               $       --      $  450,000
                                                                 -----------     -----------

  Acquisition of ASI Assets by issuance of common stock          $       --      $  850,000
                                                                 -----------     -----------

  Accrued dividends on preferred stock                           $       --      $  273,633
                                                                 -----------     -----------

  Acquisition of STR by issuance of common stock                 $       --      $5,100,000
                                                                 -----------     -----------

  Promissory note issued in connection with STR acquisition      $       --      $  375,000
                                                                 -----------     -----------
  Fair value of warrants and beneficial conversion feature
    of convertible secured notes                                 $ 6,172,150     $       --
                                                                 -----------     -----------

  Stock issued for services                                      $  242,028      $       --
                                                                 -----------     -----------

  Stock issued in legal settlement                               $   70,278      $       --
                                                                 -----------     -----------
</TABLE>

                    The accompanying notes are an integral part of these
                         condensed consolidated financial statements

                                                 9


<PAGE>

                  MARKLAND TECHNOLOGIES, INC. AND SUBSIDIARIES
            NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS

               For the Six Months Ended December 31, 2004 and 2003
                                   (Unaudited)

1.       BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements of
Markland Technologies, Inc. and Subsidiaries ("Markland" or the "Company") have
been prepared in accordance with accounting principles generally accepted in the
United States of America for interim financial information, without being
audited, pursuant to the rules and regulations of the Securities and Exchange
Commission. Accordingly, they do not include all of the information and
footnotes required by accounting principles generally accepted in the United
States of America for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary to make the financial statements not misleading have been included.
Operating results for the six months ended December 31, 2004 are not necessarily
indicative of the result that may be expected for the year ending June 30, 2005.
The unaudited condensed consolidated financial statements should be read in
conjunction with the consolidated financial statements and footnotes included in
the Company's 10-KSB, as amended, for the year ended June 30, 2004 filed with
the Securities and Exchange Commission.

The accompanying consolidated financial statements have been prepared in
conformity with accounting principles generally accepted in the United States of
America, which contemplate continuation of Markland as a going concern. Markland
has incurred net losses of $9,253,213 and $1,739,145 for the six months ended
December 31, 2004 and 2003, respectively. Markland has limited finances and may
require additional funding in order to market and license its products. During
the six months ended December 31, 2004, Markland issued secured convertible
promissory notes with a face value of $6,955,000 which, if not converted, are
repayable between September and November 2005 (see Note 6). There is no
assurance that Markland can reverse its operating losses, or that it can raise
additional capital to allow it to continue its planned operations. These factors
raise substantial doubt about Markland's ability to continue as a going concern.

Markland's ability to continue as a going concern remains dependent upon the
ability to obtain additional financing or through the generation of positive
cash flows from continuing operations. These financial statements do not include
any adjustments relating to the recoverability of recorded asset amounts that
might be necessary as a result of the above uncertainty. While Markland has
experienced operating losses in the past, due to the acquisition of EOIR,
management believes the operating portion of the business will be cash flow
positive in fiscal 2005. Management's business plan is to continue to grow the
customer base and revenues and to control and monitor operating expenses and
capital expenditures. Management believes that the business as currently
constituted will produce positive operating cash flow which, together with the
current cash levels, will enable Markland to meet existing financial obligations
as they come due during the current fiscal year. However, management can provide
no assurance that the performance of the business will meet these expectations.

Markland is subject to risks common to companies in the Homeland Defense
Technology industry, including, but not limited to, development by its
competitors of new technological innovations, dependence on key personnel,
protection of proprietary technology and loss of significant customers. Since
the United States Government represents substantially all of Markland's current
revenue, the loss of this customer would have a material adverse effect on
Markland's future operations.

2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation
---------------------------

The consolidated financial statements include the accounts of Markland and its
wholly-owned subsidiaries, Security Technology, Inc. ("STI"), Ergo Systems, Inc.
("Ergo"), Science and Technology Research Corporation, Inc. ("STR") and E-OIR
Technologies, Inc. ("EOIR"). All significant inter-company balances and
transactions have been eliminated in consolidation.


                                       10


<PAGE>

Use of Estimates in Preparation of Financial Statements
-------------------------------------------------------

The preparation of the accompanying consolidated financial statements in
conformity with accounting principles generally accepted in the United States of
America requires management to make certain estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates. Significant estimates that are
particularly susceptible to change are the determination of the fair value of
assets acquired and liabilities assumed in business combinations, impairment of
identified intangible assets, goodwill and long lived assets, the fair value of
equity instruments issued, valuation reserves on deferred tax assets and revenue
and costs recognized on long-term, fixed-price contracts.


Concentrations
--------------

Markland has cash balances in banks in excess of the maximum amount insured by
the FDIC as of December 31, 2004.

Substantially all revenue is generated from contracts with Federal government
agencies. Consequently, substantially all accounts receivable are due from
Federal government agencies either directly or through other government
contractors.


Property and Equipment
----------------------

Property and equipment are valued at cost and are being depreciated over their
useful lives using the straight-line method for financial reporting. Routine
maintenance and repairs are charged to expense as incurred. Expenditures which
materially increase the value or extend useful lives are capitalized.

Property and equipment are depreciated using straight-line methods over the
estimated useful lives of assets as follows:

                 Software                                3 years
                 Computer equipment                      3 years
                 Vehicles                                5 years
                 Leasehold improvements                  Shorter of useful
                                                           life and lease term
                 Furniture and fixtures                  5-7 years

Property and equipment consisted of the following at December 31, 2004:

                 Software                                $      93,993
                 Computer equipment                            561,928
                 Vehicles                                       55,268
                 Leasehold improvements                        245,150
                 Furniture and fixtures                        146,542
                                                         --------------
                                                         $   1,102,881
                 Less accumulated depreciation                (151,551)
                                                         --------------
                                                         $     951,330
                                                         ==============

Depreciation and amortization expense for the six months ended December 31, 2004
and 2003 was $154,973 and $2,255, respectively.


                                       11

<PAGE>

Revenue Recognition
-------------------

We recognize revenue when the following criteria are met: (1) we have persuasive
evidence of an arrangement, such as contracts, purchase orders or written
requests; (2) we have completed delivery and no significant obligations remain,
(3) our price to our customer is fixed or determinable, and (4) collection is
probable. We recognize revenues at the time we perform services related to
border security logistic support. With respect to our revenues from our chemical
detectors, we recognize revenue under the units-of-delivery method. At the time
the units are shipped to the United States Navy, the Company recognizes as
revenues the contract price of each unit and recognizes the applicable cost of
each unit shipped. As of June 30, 2004, the Company had completed delivery of
all outstanding orders under the contract for chemical detector units.

Revenues from time and materials contracts are recognized as costs are incurred.

Revenues from firm fixed price contracts are recognized on the
percentage-of-completion method, either measured based on the proportion of
costs recorded to date on the contract to total estimated contract costs or
measured based on the proportion of labor hours expended to date on the contract
to total estimated contract labor hours, as specified in the contract.

Provisions for estimated losses on all contracts are made in the period in which
such losses become known. Changes in job performance, job conditions, and
estimated profitability, including those arising from contract penalty
provisions, and final contract settlements may result in revision to cost and
income and are recognized in the period in which the revisions are determined.

The Company participates in teaming agreements where they are the primary
contractor and they participate with other organizations to provide services to
the Federal government. The Company has managerial and oversight responsibility
for team members as well as the responsibility for the ultimate acceptability of
performance under the contract. The Company includes as revenues the amounts
that they bill under the teaming arrangements and include as direct costs
amounts that are reimbursable or paid to team members.

Research and Development
------------------------

Research and development costs are charged to expense as incurred. Markland
capitalizes costs related to acquired technologies that have achieved
technological feasibility and have alternative uses. Acquired technologies which
do not meet this criteria are expensed as research and development costs.

Loss Per Share
--------------

Basic and diluted net loss per common share has been computed based on the
weighted average number of shares of common stock outstanding during the periods
presented.

Common stock equivalents, consisting of convertible debt, Series A and D
Convertible preferred stock, options and warrants were not included in the
calculation of the diluted loss per share because their inclusion would have had
the effect of decreasing the loss per share otherwise computed.

Impairment of Intangible Assets
-------------------------------

The Company records as goodwill the excess of purchase price over the fair value
of the identifiable net assets acquired. Statements of Financial Accounting
Standards (SFAS ) No. 142, "Goodwill and Other Intangible Assets", prescribes a
two-step process for impairment testing of goodwill, which is performed
annually, as well as when an event triggering impairment may have occurred. The
first step tests for impairment, while the second step, if necessary, measures
the impairment. The Company has elected to perform its annual analysis during
the fourth quarter of each fiscal year. No indicators of impairment were
identified in the six months ended December 31, 2004 and 2003.


                                       12

<PAGE>

Impairment of Long-Lived Assets
-------------------------------

Pursuant to SFAS No. 144, "Accounting for the Impairment or Disposal of
Long-lived Assets", Markland continually monitors events and changes in
circumstances that could indicate carrying amounts of long-lived assets may not
be recoverable. An impairment loss is recognized when expected cash flows are
less than the asset's carrying value. Accordingly, when indicators of impairment
are present, Markland evaluates the carrying value of such assets in relation to
the operating performance and future undiscounted cash flows of the underlying
assets. Markland's policy is to record an impairment loss when it is determined
that the carrying amount of the asset may not be recoverable. No impairment
charges were recorded in six months ended December 31, 2004 and 2003.

Stock-Based Compensation
------------------------

At December 31, 2004, as permitted under SFAS No. 148, "Accounting for
Stock-Based Compensation - Transition and Disclosure", which amended SFAS No.
123, "Accounting for Stock-Based Compensation", Markland has elected to continue
to follow the intrinsic value method in accounting for its stock-based employee
compensation arrangements as defined by Accounting Principles Board Opinion
("APB") No. 25, "Accounting for Stock Issued to Employees", and related
interpretation including Financial Accounting Standards Board ("FASB")
Interpretation No. 44, "Accounting for Certain Transactions Involving Stock
Compensation", an interpretation of APB No. 25. Had the Company followed the
fair value method in accounting for its stock-based employee compensation it
would have had the following effect on the net loss for the three months and six
months ended December 31:

<TABLE>
                                                                 Six months ended               Three months ended
                                                                    December 31,                    December 31,
                                                               2004            2003            2004             2003
                                                               ----            ----            ----             ----
<S>                                                        <C>             <C>             <C>             <C>
Net loss as reported                                       $(9,253,213)    $(1,739,145)    $(8,007,192)    $  (827,209)
Add: stock-based employee compensation under
intrinsic value method included in net loss                    626,204              --         427,356              --
Deduct: stock-based employee compensation
 under fair value method                                    (1,237,292)             --        (779,734)             --
                                                           ----------------------------    ----------------------------
Pro forma net loss                                          (9,864,301)     (1,739,145)     (8,359,570)       (827,209)
Less: dividends to preferred stockholders                           --        (316,790)             --        (161,101)
                                                           ----------------------------    ----------------------------
Pro forma net loss to applicable to common stockholders    $(9,864,301)    $(2,055,935)    $(8,359,570)    $  (988,310)
                                                           ============================    ============================
Basic and diluted loss per share - as reported             $     (0.20)    $     (0.38)    $     (0.15)    $     (0.16)
                                                           ============================    ============================
Basic and diluted loss per share - pro forma               $     (0.22)    $     (0.38)    $     (0.16)    $     (0.18)
                                                           ============================    ============================
</TABLE>

Impact of Recently Issued Accounting Standards
----------------------------------------------

In December 2004, the FASB issued SFAS No. 123R, "Accounting for Stock-Based
Compensation" ("SFAS No. 123R"). SFAS No. 123R establishes standards for the
accounting for transactions in which an entity exchanges its equity instruments
for goods or services. This Statement focuses primarily on accounting for
transactions in which an entity obtains employee services in share-based payment
transactions. SFAS No. 123R requires that the fair value of such equity
instruments be recognized as an expense in the historical financial statements
as services are performed. Prior to SFAS No. 123R, only certain pro forma
disclosures of fair value were required. The provisions of this Statement are
effective for small business issuers the first interim reporting period that
begins after December 15, 2005. Accordingly, Markland will adopt SFAS No. 123R
commencing with the quarter ending March 31, 2006. If Markland had included the
fair value of employee stock options in these financial statements, the net loss
for the three and six months ended December 31, 2004 and 2003 would have been as
disclosed above. Accordingly, the adoption of SFAS No. 123R is expected to
have a material effect on our financial statements.


                                       13

<PAGE>

3.       ACQUISITIONS

Purchase of Science and Technology Research, Inc.
-------------------------------------------------

In October 2003, Markland completed the acquisition of 100% of the common stock
of Science and Technology Research, Inc., a Maryland corporation ("STR"), by its
subsidiary, Security Technology, Inc., a Delaware Corporation ("STI"), through a
merger of STI with newly formed STR Acquisition Corporation, a Maryland
Corporation. STR is a producer of the U.S. Navy's Shipboard Automatic Chemical
Agent Detection and Alarm System (ACADA). The Navy deploys the "man-portable"
point detection system to detect all classic nerve and blister agents as well as
other chemical warfare agent (CWA) vapors.

The purchase price for STR was $6,475,000 and consisted of $900,000 in cash,
which was paid in October 2003, 1,539,779 shares of common stock valued at
$5,100,000, a promissory note of $375,000 and acquisition costs of $100,000. The
promissory note bears no interest and, under amended terms, was paid in full by
December 31, 2004. Holders of the shares of common stock were granted piggy-back
registration rights.

Markland also entered into a consulting agreement with the principal shareholder
and employee of STR (see Note 11).

Purchase of E-OIR Technologies, Inc.
------------------------------------

On June 29, 2004, Markland acquired all of the outstanding stock of E-OIR
Technologies, Inc. ("EOIR") for $8,000,000 in cash and $11,000,000 in principal
amount of five year notes secured by the assets and stock of EOIR. EOIR is a
provider of technology and services to the US Army Night Vision Laboratories and
has expertise in wide area remote sensing using both electro-optic and infrared
technologies. The acquisition was consummated in furtherance of Markland's
stated strategy of making synergistic acquisitions in order to provide products
and services to Homeland Defense, the Department of Defense and U.S.
Intelligence Agencies.

In connection with this acquisition, Markland has also adopted a Stock Incentive
Plan (see Note 9).

Unaudited pro forma financial information for the six months and three months
ended December 31, 2003, had the acquisitions of STR and EOIR been completed as
of July 1, 2003, is as follows:

<TABLE>
                                                       December 31, 2003
                                                       -----------------
                                              Six Months ended   Three Months ended
                                              ----------------   ------------------
                                                            (000's)
<S>                                              <C>                 <C>
Revenues                                         $ 27,280            $ 14,890
                                                 =========           =========
Loss from operations                             $   (325)           $   (306)
                                                 =========           =========
Net loss applicable to common stockholders       $ (1,636)           $ (1,154)
                                                 =========           =========
Net loss applicable to common stockholders
     per common share                            $  (0.27)           $  (0.21)
                                                 =========           =========
</TABLE>

4.       AMORTIZATION OF INTANGIBLE ASSETS

Amortizable intangible assets consist of the following at December 31, 2004:

         Amortizable intangibles - EOIR        $ 11,755,000
         Amortizable intangibles - Ergo             400,000
         Amortizable intangibles - ASI            1,000,000
         Amortizable intangibles - STR            1,551,944
                                               -------------
              Total amortizable intangibles    $ 14,706,944
         Accumulated amortization                (1,530,382)
                                               -------------
              Net amortizable intangibles      $ 13,176,562
                                               =============


                                       14

<PAGE>

The intangible assets entitled "Acoustic Core" which has a carrying value of
$1,300,000 are not available for commercial sale as of December 31, 2004.
Accordingly, no amortization expense has been recorded through December 31,
2004. Amortization expense was $963,985 and $150,001 for the six months ended
December 31, 2004 and 2003, respectively.

5.       GOODWILL

On the date EOIR was acquired by Markland, EOIR had a payable of $724,459 to the
former stockholders related to possible taxes due in conjunction with the final
pre-acquisition tax return. In the quarter ended December 31, 2004, this accrual
was determined to no longer be required and no distributions are due to the
former stockholders. This reduction in payables was considered an adjustment in
the fair value of EOIR's net assets acquired and, accordingly, was recorded as a
reduction in Goodwill of $724,459.

6.       LONG-TERM DEBT

Note Payable - STR Acquisition
------------------------------

On October 1, 2003, Markland issued a note in the amount of $375,000 in
connection with the acquisition of STR. This note was paid in full by December
31, 2004.

On March 15, 2004, Markland agreed to issue to George Yang $40,000 of cash and
an additional 50,000 shares of common stock valued at $66,500 in exchange for
his agreement to extend the note to October 15, 2004. These amounts were charged
to interest expense in the statement of loss for the year ended June 30, 2004.
Accounts payable at December 31, 2004 include $40,000 related to this agreement.

Notes Payable - EOIR Acquisition
--------------------------------

On June 29, 2004, EOIR issued notes guaranteed by Markland in the face amount of
$11,000,000 in connection with the acquisition of EOIR's common stock. These
notes accrue interest at 6% compounded monthly and interest is payable in
quarterly installments over 60 months in addition to annual principal payments.
The fair market value of these notes was $9,532,044 as determined by an
independent valuation. The discount of $1,467,956 is being amortized to interest
expense over the life of the notes. During the six months ended December 31,
2004, $146,796 was amortized to interest expense. The carrying value and
unamortized discount at December 31, 2004 was $9,678,840 and $1,321,160
respectively.

<TABLE>

Other Long-Term Bank Debt
-------------------------

Markland's other long-term bank debt consists of the following as of December
31, 2004:

<S>                                                                                 <C>
First Market Bank, secured by research equipment, dated October, 2002 with
monthly payments of $3,715 including interest of LIBOR plus 2.75%
(5.31% at December 31, 2004)                                                       $117,755

First Market Bank, dated July, 2002 with monthly payments of $15,278 plus
interest of LIBOR plus 2.75%, (5.31% at December 31, 2004)                           93,697

First Market Bank, secured by leasehold improvements, dated March 19, 2003
with monthly payments of  $3,514 including interest of 5.05%                         43,211

American Honda Finance, secured by vehicle, dated March 24, 2003 with
monthly payments of $406 including interest of 4.70%                                 15,167
                                                                                   --------
                                                                                   $269,830
                                                                                   ========
</TABLE>

                                       15

<PAGE>

Convertible Notes and Warrant Purchase Agreements - September 21, 2004
----------------------------------------------------------------------

On September 21, 2004, Markland Technologies, Inc. entered into a Purchase
Agreement with DKR Soundshore Oasis Holding Fund, Ltd. and DKR Soundshore
Strategic Holding Fund, Ltd. (together the "Investors") pursuant to which the
Company sold warrants to purchase shares of common stock (the "Warrants") and
secured convertible promissory notes (the "Convertible Notes") for the
aggregate consideration of $4,000,000. The Convertible Notes are initially
convertible into $5,200,000 of common stock at a price of $0.80 per share,
subject to certain adjustments as defined in the Purchase Agreement. The
Warrants entitle the Investors to purchase an aggregate of 6,500,000 shares of
our Common Stock at an initial conversion price of $.80 at any time and from
time to time through September 21, 2009.

The Purchase Agreement contains standard representations, covenants and events
of default. Occurrence of an event of default allows the Investors to accelerate
the payment of the Convertible Notes and/or exercise other legal remedies,
including foreclosing on collateral.

The Convertible Notes are in the aggregate principal amount of five million two
hundred thousand dollars ($5,200,000) and accrue interest daily at the rate of
eight percent (8%) per year on the then outstanding and unconverted principal
balance of the Convertible Notes. Under the terms of the Convertible Notes,
$4,000,000 of the outstanding principal and interest is required to be prepaid
by March 15, 2005. In the event the Investors do not receive such prepayment
amount by March 15, 2005, then the Conversion Price shall automatically
become the Adjusted Conversion Price which is the lower of $0.80 a share or 80%
of the average of the Closing Prices during the five (5) Trading Days prior to
the applicable Conversion Date. This shall not be an event of default. The
remaining outstanding balance is due by September 21, 2005. At anytime, and at
the option of the Investors, the outstanding principal and accrued interest of
the Convertible Notes may be converted into shares of Markland's common stock.

The Company has granted a security interest in and a lien on substantially all
of its assets to the Investors pursuant to the terms of a Security Agreement,
dated September 21, 2004.

As part of this financing, James LLC, the largest holder of Series D Preferred
Stock, agreed not to sell any of its holdings of Series D Preferred Stock until
the earlier to occur of: (1) notice from the Company and the investors that the
transactions contemplated in the Purchase Agreement had been terminated, or (2)
March 15, 2005. However, pursuant to the terms of the lock-up agreement, James,
LLC may still convert their Series D shares and sell the underlying shares of
common stock in accordance with Rule 144 of the Securities Act of 1933, as
amended. In exchange, Markland agreed that under certain conditions, if they did
not redeem the Series D stock by January 15, 2005, they would issue to James LLC
a warrant to purchase 1,088,160 shares of our common stock at $.80 per share.

Subject to conditions set forth in the agreement, the Company may require the
Investors to purchase $1,000,000 of Additional Notes on the Additional Closing
Date.

On September 21, 2004, Markland estimated the fair value of the Warrants and
allocated the gross proceeds of $4,000,000 on a relative fair value basis
between the Convertible Notes and the Warrants. Based on this analysis, Markland
estimated that the relative fair value of the Warrants and Convertible Notes
were approximately $1,659,000 and $2,341,000, respectively. Based on the initial
conversion price of $0.80 per share, Markland estimated that the Convertible
Notes could convert into 6,500,000 shares of common stock and the effective
conversion price was approximately $0.36 per share. Accordingly, Markland
determined that there was a beneficial conversion feature of approximately
$3,054,000. Since the beneficial conversion feature exceeded the carrying value
of the Convertible Notes, the recognition of the beneficial conversion feature
was limited to $2,341,000. As a result, the Convertible Notes were recorded net
of the fair value of the Warrants and beneficial conversion feature at $0 and
will be accreted to $5,200,000, the face value of the Convertible Notes, over
the term of those notes. Non-cash interest expense related to the accretion of
this discount was $2,447,238 for the six months ended December 31, 2004. The
carrying value and unamortized discount at December 31, 2004 was $2,447,238 and
$2,752,762 respectively.


                                       16

<PAGE>

In conjunction with the issuance of these Convertible Notes and Warrants,
Markland incurred cash financing costs of $766,628. These costs have been
recorded in Other Assets as deferred financing costs and are being amortized to
interest expense over the term of the Convertible Notes. Non-cash interest
expense related to the amortization of deferred financing costs was $360,793 in
the six months ended December 31, 2004.

Warrants to purchase 1,500,000 shares of common stock at an initial exercise
price of $1.50 and three year term were issued as finders fees. The fair value
of these warrants have been calculated at $887,374 and have been recorded as
additional deferred financing costs and are being amortized to interest expense
over the term of the Convertible Notes. Non-cash interest expense related to the
amortization of these deferred financing costs was $403,459 in the six months
ended December 31, 2004.

See Note 9 of our condensed consolidated financial statements for information
regarding the December 28, 2004, reduction in the exercise price of the
Warrants.

Convertible Notes and Warrant Purchase Agreements - November 9, 2004
--------------------------------------------------------------------

On November 9, 2004, the Company entered into a Securities Purchase Agreement
(the "Securities Purchase Agreement") with Harborview Master Fund, LP and
Southridge Partners, LP (the "November Investors") pursuant to which the Company
sold warrants to purchase shares of common stock (the "November Warrants") and
secured convertible promissory notes (the "November Convertible Notes") for the
aggregate consideration of $1,350,000. The November Convertible Notes are
initially convertible into $1,755,000 of common stock at a price of $0.80 per
share, subject to certain adjustments as defined in the Purchase Agreement.


                                       17

<PAGE>

The November Warrants entitle the November Investors to purchase an aggregate of
2,531,250 shares of our common stock, at any time and from time to time, through
November 9, 2009 at an initial exercise price of $1.50 per share. The November
Convertible Notes are in the aggregate principal amount of one million seven
hundred fifty five thousand dollars ($1,755,000) and accrue interest daily at
the rate of eight percent (8%) per year on the then outstanding and unconverted
principal balance of the notes. Under the terms of the November Convertible
Notes $1,000,000 of the outstanding principle and interest is required to be
prepaid by March 15, 2005. In the event the November Investors do not receive
such prepayment amount by the prepayment date then the conversion price shall
automatically become the adjusted conversion price which is the lower of $0.80
per share or 80% of the average of the closing prices during the five trading
days prior to the applicable conversion date. This shall not be an event of
default. The remaining outstanding balance is due by September 21, 2005. The
notes will mature on November 9, 2005. At any time, and at the option of the
November Investors, the outstanding principal and accrued interest of the notes
may be converted into shares of our common stock at an initial conversion price
per share of $0.80.

On November 9, 2004, Markland estimated the fair value of the November Warrants
and allocated the gross proceeds of $1,350,000 on a relative fair value basis
between the November Convertible Notes and the November Warrants. Based on this
analysis, Markland estimated that the relative fair value of the November
Warrants and November Convertible Notes were approximately $571,513 and
$778,487, respectively. Based on the initial conversion price of $0.80 per
share, Markland estimated that the November Convertible Notes could convert into
2,193,750 shares of common stock and the effective conversion price was
approximately $0.36 per share. Accordingly, Markland determined that there was a
beneficial conversion feature of approximately $713,263. As a result, the
November Convertible Notes were recorded net of the fair value of the November
Warrants and beneficial conversion feature at $65,224 and will be accreted to
$1,755,000, the face value of the November Convertible Notes, over the term of
those notes. Non-cash interest expense related to the accretion of this discount
was $240,735 for the six months ended December 31, 2004. The carrying value and
unamortized discount at December 31, 2004 was $305,959 and $1,449,041
respectively.

In conjunction with the issuance of these November Convertible Notes and
November Warrants, Markland incurred financing costs of $175,530. These costs
have been recorded in Other Assets as deferred financing costs and are being
amortized to interest expense over the term of the November Convertible Notes.
Non-cash interest expense related to the amortization of deferred financing
costs was $25,007 in the six months ended December 31, 2004.

Under the terms of each these November Convertible Notes, we are required to pay
a principal amount on each note equal to the consideration paid by the November
Investors holding such note plus any accrued interest by March 15, 2005, and the
remaining outstanding balance by November 9, 2005. If we do not make the March
15, 2005 prepayment, the conversion price will be adjusted from $0.80 per share
to the lower of (i) $0.80 and (ii) a floating rate equal to 80% of average
closing price per share of our common stock for the five trading days preceding
conversion. Additionally, if we do not make the March 15, 2005 prepayment, the
exercise price of the November Warrant will be reduced from $1.50 to the lesser
of (i) $0.792 and (ii) 80% of the average closing price per share of our common
stock on the date the adjustment is made.

The other terms of these notes and warrants are substantially the same as the
Convertible Notes and Warrants Purchase agreement dated September 21, 2004
described above.

See Note 9 of our condensed consolidated financial statements for information
regarding the December 28, 2004, reduction in the exercise price of the November
Warrants.

7.       EQUITY LINE

On September 10, 2003, Markland entered into a Private Equity Credit Agreement
with Brittany Capital Management, Ltd. ("Brittany"). Markland agreed to issue
and sell to Brittany up to $10,000,000 worth of its common stock over the next
three years. Prior to any sales, Markland is required to file a registration
statement with the Securities and Exchange Commission, relating to the shares to
be issued, and to have such registration statement declared effective.


                                       18

<PAGE>

For all periods presented, Markland has determined that the fair value of this
Put was not material.

The Equity Line expired on September 10, 2004 and the Company is no longer
entitled to require Brittany to purchase shares of Common Stock pursuant to it.

8.       STOCKHOLDERS' EQUITY

Preferred Stock:
----------------

The Company is authorized to issue 5,000,000 shares of preferred stock which may
be issued in series with such designations, preferences, stated values, rights
qualifications, or limitations as determined by the Board of Directors.

         Series A Redeemable Convertible Preferred Stock
         -----------------------------------------------

On June 30, 2003, Markland issued 30,000 shares of our Series A Non-Voting
Redeemable Convertible Preferred Stock in satisfaction of our remaining
obligations under a promissory note. The Series A Preferred Stock has no par
value, is non-voting and has a stated value of $10 per share. The Preferred
Stock is convertible at any time at the option of the Company, and cannot be
converted by the holder. This stock is convertible at the rate of three shares
of Series A Preferred Stock for each share of common stock. This conversion rate
may be adjusted at any time by the Company as a result of either the sale of the
Company or as a result of a stock split or stock dividend that is issued by the
Company while these shares remain outstanding.

The Company shall have the right, but not the obligation to, at any time after
the issuance of these shares to redeem all or any portion of the outstanding
shares of Series A Preferred Stock from the holder in cash at the stated value
of $10 per share by sending notice to the holder. The Series A Preferred Stock
has a liquidation preference of $10 per share. This stock does not accrue
dividends.

         Series C 5% Cumulative Convertible Preferred Stock
         --------------------------------------------------

The Series C Preferred Stock is non-voting and has a liquidation preference of
$1,000 per share. The holders of the Series C Preferred Stock are entitled to
receive dividends on each share of preferred stock, which shall accrue on a
daily basis at the rate of 5% per annum on the sum of the liquidation preference
plus all accumulated and unpaid dividends thereon. These dividends shall accrue
whether or not they have been declared or there are legally available funds with
which to pay them, and at the option of the holders are payable either in cash
or in unrestricted common stock. The Series C Preferred Stock is redeemable at
any time by Markland, and cannot be converted by the holders without written
permission for a period of 6 months following the issuance of the shares and
then only 10% may be converted per month thereafter. The Series C Preferred
Stock is convertible at the option of the holder at a conversion price ranging
from 65% to 80% of the common stock's market price at the time of the
conversion.

At December 31, 2004, there were no shares of Series C Preferred Stock issued or
outstanding.

8.       STOCKHOLDERS' EQUITY (CONT)

Series D Convertible Preferred Stock
------------------------------------

Shares of the Series D Convertible Preferred Stock have a liquidation preference
of $1,000 per share, are non-voting, do not accrue dividends, are redeemable by
Markland anytime and are convertible into shares of Markland's common stock at a
conversion price ranging from 65% to 80% of the common stock's market price at
the time of the conversion.


                                       19

<PAGE>

The Series D preferred stock is convertible at the option of the stockholder at
any time. The number of shares of our common stock into which each share of
Series D preferred is convertible is determined by dividing $1,000 by the
discounted bid price. The "discounted" bid price is the average closing bid
price of our common stock during the five business days immediately preceding
the conversion date multiplied by the applicable discount factor, as set forth
below.

  -------------------------------------------------------- ---------------------

  AVERAGE CLOSING BID PRICE (1)                            DISCOUNT FACTOR
  -------------------------------------------------------- ---------------------
  $15.00 or less                                                   80%
  -------------------------------------------------------- ---------------------
  more than $15.00, but less than or equal to $30.00               75%
  -------------------------------------------------------- ---------------------
  more than $30.00, but less than or equal to $45.00               70%
  -------------------------------------------------------- ---------------------
  more than $45.00                                                 65%
  -------------------------------------------------------- ---------------------

         ______________________
         (1) After an adjustment for a 1-for-60 reverse stock split effective
             October 27, 2003.

The Series D preferred stock can be converted only to the extent that the Series
D stockholder will not, as a result of the conversion, hold in excess of 9.999%
of the total outstanding shares of our common stock.

During the six months ended December 31, 2004, 7,331 shares of Series D were
converted into 15,868,206 common shares of the Company.

At December 31, 2004 there were 15,455 shares of Series D outstanding.

Reverse Stock Split
-------------------

On September 4, 2003, Markland's board of directors approved a resolution to
effect a one-for-sixty reverse stock split. This action was subsequently
approved by shareholder action which was approved by written consent of the
Markland shareholders who held at least a majority of the voting power of the
common stock, at least 67% of the voting power of the Series C Cumulative
Convertible Preferred Stock, and at least 67% of the voting power of the Series
D Cumulative Convertible Preferred Stock. As a result, each sixty shares of
common stock was converted automatically into one share of common stock. To
avoid the issuance of fractional shares of common stock, each fractional share
resulting from the reverse split was rounded up to a whole share. The reverse
stock split did not reduce the 500,000,000 shares of common stock that Markland
is authorized to issue. The resolution, which impacts shareholders of record as
of September 5, 2003 became effective on October 27, 2003. All share amounts and
per share data have been restated to reflect this reverse stock split.

Common Stock Issuances
----------------------

Markland has entered into compensation agreements with certain officers and a
consultant (see Note 11) which provide for, among other things, certain
performance-based stock grants. In connection with these agreements, Markland
issued 6,637,145 shares of common stock during the six months ended December 31,
2004. Due to the indeterminate number of shares to be issued under these
agreements, Markland accounts for these stock compensation plans under variable
accounting.

For the six months ended December 31, 2004, Markland recognized unearned
compensation, additional paid in capital and stock compensation expense of
$6,939,053, $9,192,476 and $2,253,423 respectively.

During the six months ended December 31, 2004, Markland also issued the
following:

o        466,994 shares of its common stock to other employees and consultants
         as compensation


                                       20

<PAGE>

o        15,868,206 shares of its common stock on conversion of 7,331 Series D
         shares.

o        833,333 shares of its common stock in connection with satisfying reset
         rights of an existing investor and a result of the Convertible Note and
         Warrant Purchase Agreement entered into on September 21, 2004 (see Note
         6).

o        226,096 shares with a fair value of $108,528 of its common stock issued
         as finders fees in connection with its acquisition of EOIR which was
         recorded as additional goodwill.

o        1,968,750 shares of its common stock in connection with the exercise of
         warrants.

o        152,778 shares with a fair value of $70,278 of its common stock issued
         as settlement in connection with litigation.

Markland has established the following reserves for the future issuance of
common stock as follows:

         Reserve for the exercise of warrants                     27,616,049
         Reserve for stock option plans                           25,000,000
         Reserve for conversion of Series A Preferred Stock           10,000
         Reserve for conversion of Series D Preferred Stock       24,767,628
                                                                -------------
                 Total reserves                                   77,393,677
                                                                =============

The Company is also obligated to issue certain shares under employment and
consulting agreements (see Note 11).

9.       OPTIONS AND WARRANTS

In conjunction with the Company's acquisition of EOIR, the Company adopted the
2004 Stock Incentive Plan ("the Plan"). The Plan authorizes the Company to issue
up to 25,000,000 of common shares in the form of options, stock awards,
performance share awards or stock appreciation rights.

On June 29, 2004, the Company issued options to eleven former minority owners of
EOIR who have continued employment with the Company. These options have a ten
year term and vest ratably over a five year period. Ten of these employees
received options to purchase 9,345,737 shares of common stock at a price of
$.3775. On the date of grant, the intrinsic value of these options, $3,528,016,
was recorded as unearned stock-based compensation and additional paid in
capital. This intrinsic value will be amortized to stock compensation over the
five year vesting period.

One employee received five options, each of which allows for the purchase of a
number of shares equal to .11799575 times a fraction of $1,600,000 divided by
the fair value of the stock on the vesting date. One of these options vests each
year for the next five years. The exercise price of these options will be
one-half the fair value of the stock on the vesting date. The intrinsic value of
these options based on the fair value of the stock on December 31, 2004 is
$471,983. This intrinsic value has been recorded as unearned stock-based
compensation and additional paid in capital. Due to the variable nature of the
exercise price and number of shares to be issued under these options, the
intrinsic value will be remeasured each period until the terms are fixed. The
intrinsic value of each option will be amortized over the vesting periods. As of
December 31, 2004, the maximum number of shares issuable under these options is
1,210,213.

During the three months ended December 31, 2004, 3,009,574 options were
cancelled due to the departure of four employees. In conjunction with the
departure of two of these employees, the Company modified the options so that
the employees were immediately vested in 40% of the options held. Without
modification, these options would have been cancelled upon termination. As a
result of this modification, the Company remeasured the intrinsic value on the
remeasurement date and determined that there was no incremental value.
Therefore, the Company fully amortized the remaining unearned portion of the
vested options upon modification. The cancellation of the remaining unvested
options resulted in a reduction in unearned compensation and additional paid-in
capital of $1,136,099.


                                       21

<PAGE>

For the six months ended December 31, 2004, the Company recorded $627,355 in
amortization relating to the Plan options.

Markland has also agreed to grant options to purchase an additional 5,000,000
shares of common stock to employees of EOIR in the future. Markland expects that
these options will vest over five years after the date of grant and will have an
exercise price equal to the fair market value of the common stock on the date of
grant.

There were no options issued in the six months ended December 31, 2004 and
1,000,229 were vested at December 31, 2004.

At December 31, 2004, the Company had the following outstanding warrants:

<TABLE>
                                                   Number of
                                                     Shares               Exercise               Date of
                                                  Exercisable              Price               Expiration
                                                  -----------              -----               ----------
<S>                                                <C>                     <C>                      <C>
Issued in conjunction with April 2, 2004
   private placement                               3,333,333               $1.25              April 2, 2007
                                                     333,333               $1.40              April 2, 2007
Issued in conjunction with April 16, 2004
   private placement                               3,333,333               $1.50             April 16, 2007
                                                      25,000               $2.00             April 16, 2007
Issued in conjunction with May 3, 2004
   private placement                               7,098,750               $1.50               May 3, 2007
                                                     529,800               $1.50               May 3, 2007

Issued in conjunction with September 21, 2004                                                 September 21,
   convertible note                                5,500,000               $0.60                  2009
                                                     350,000               $0.60              September 21,
                                                     750,000               $1.50                  2007

Issued in conjunction with November 9, 2004
   convertible note                                1,625,000               $1.50            November 9, 2009
                                                     337,500               $1.50               November 9,
                                                                                                  2007
Issued in conjunction with December 7, 2004
   consulting agreement                            4,400,000               $0.60            November 30, 2007
                                                -------------
                    Total                         27,616,049
                                                -------------

Weighted average exercise price                                            $1.09
Weighted average remaining life                                                                3.07 years
</TABLE>

On December 7, 2004, we entered into an Agreement with Trilogy Capital Partners,
Inc. ("Trilogy"). Pursuant to that agreement, for a period of twelve months,
Trilogy will provide publicity and marketing services for us. In addition,
Trilogy will perform the functions of an in-house Investor Relations Officer for
us. In return we are required to pay Trilogy a fee of $10,000 per month for
twelve months. In addition, pursuant to this agreement, we issued to Trilogy
warrants to purchase four million (4,000,000) shares of our common stock, par
value $0.0001 per share, with an exercise price of $0.60 per share. The fair
value of these warrants was calculated at $2,391,592 and was recorded as
unearned compensation and additional paid-in capital and will be expensed over a
period of twelve months from December 7, 2004. We also issued warrants to
purchase four hundred thousand (400,000) shares of our common stock on
substantially the same terms to an individual for the introduction to Trilogy.
In the six months ended December 31, 2004, we recorded amortization of unearned
compensation in Selling, General and Administrative expense of $137,976 related
to this agreement.

On December 28, 2004, we entered into agreements with DKR Soundshore Oasis
Holding Fund Ltd. and DKR Soundshore Strategic Holding Fund Ltd. (collectively
"DKR") to amend terms of warrants issued to DKR on September 21, 2004 (the "DKR
Warrants"), for the purchase of up to 6,500,000 shares of our common stock,
$0.0001 par value per share issued in connection with our September 21, 2004,
private placement. Specifically, subject to the terms and conditions contained
in the DKR Amendment, the parties have agreed:


                                       22


<PAGE>

         o        To amend the DKR Warrants so that DKR may exercise all or any
                  portion of the Warrants for an exercise price of $0.60 per
                  share of the Common Stock, from December 28, 2004 until
                  February 28, 2005 (the "DKR Exercise Period"). At the end of
                  the DKR Exercise Period, the amendment shall expire and the
                  exercise terms of the DKR Warrants existing prior to December
                  28, 2004, shall be effective.
         o        That DKR shall exercise a minimum of $600,000 in exercise
                  price of the DKR Warrants, as amended, on or before the close
                  of business on December 31, 2004.
         o        That the number of shares of Common Stock subject to the DKR
                  Warrants shall not be adjusted as a result of the temporary
                  reduction in exercise price.
         o        At the end of the DKR Exercise Period, we will issue to DKR
                  warrants to purchase a number of shares of Common Stock equal
                  to the number of shares purchased by DKR during the DKR
                  Exercise Period at an exercise price of $1.50 per share (the
                  "NEW DKR WARRANTS").

On December 30, 2004, DKR exercised warrants to purchase 1,000,000 shares of the
Company's common stock at $0.60 per share for proceeds of $ $600,000. As a
result of this modification of terms, Markland remeasured the fair value of the
DKR Warrants. Since the beneficial conversion feature originally measured (see
Note 6) exceeded the proceeds allocated to the convertible notes, no additional
beneficial conversion feature was recorded as a result of this modification.

On December 29, 2004, we entered into an agreement with Greenfield Capital
Partners LLC ("Greenfield") to amend the terms of a warrant issued to Greenfield
(the "Greenfield Warrants") on September 22, 2004 for the purchase of up to
750,000 shares of Common Stock as compensation for consulting services performed
by Greenfield in connection with our September 21, 2004 private placement.
Specifically, subject to the terms and conditions contained in the Greenfield
Amendment, the parties have agreed:

         o        To amend the Greenfield Warrants so that Greenfield may
                  exercise all or any portion of the Greenfield Warrant for an
                  exercise price of $0.60 per share of Common Stock, from
                  December 29, 2004 until January 31, 2005 (the "Greenfield
                  Exercise Period").
         o        That Greenfield shall exercise a minimum of 400,000 of the
                  Greenfield Warrants, as amended, on or before December 31,
                  2004, and 350,000 of the Greenfield Warrants, as amended, on
                  or before the close of business on January 31, 2005.
         o        That the number of shares of Common Stock subject to the
                  Greenfield Warrant shall not be adjusted as a result of the
                  temporary reduction in exercise price.
         o        That section 2(b) of the Greenfield Warrant shall be amended
                  so as to prohibit the exercise of the Greenfield Warrants to
                  the extent that such issuance would result in Greenfield
                  beneficially owning more than 9.99% of the outstanding shares
                  of Common Stock.

On December 30,2004, Greenfield exercised warrants to purchase 400,000 shares of
the Company's common stock at $0.60 per share for proceeds of $240,000. As a
result of this modification of terms, Markland remeasured the fair value of the
Greenfield Warrants. Markland determined there was no material incremental value
as a result of this remeasurement.

On December 29, 2004, we entered into an agreement with Southridge Partners LP
("Southridge") to amend the terms of a warrant issued to Southridge on November
9, 2004 (the "Southridge Warrant") for the purchase of up to 568,750 shares of
Common Stock in connection with our November 9, 2004, private placement.
Specifically, subject to the terms and conditions contained in the Southridge
Amendment, the parties have agreed:

         o   To amend the Southridge Warrant so that Southridge may exercise all
             or any portion of the Southridge Warrant for an exercise price of
             $0.60 per share of Common Stock, from December 29, 2004 until
             December 31, 2004 (the "Southridge Exercise Period").

         o   That Southridge shall exercise all of the of the Southridge
             Warrant, as amended, on or before the close of business, New York
             City time, on December 31, 2004.


                                       23




<PAGE>

         o   That the number of shares of Common Stock subject to the Southridge
             Warrant shall not be adjusted as a result of the temporary
             reduction in exercise price.

         o   That section 11(a) of the Southridge Warrant shall be deleted in
             its entirety so as to eliminate restrictions on the ability of
             Southridge to exercise the Southridge Warrants based on the number
             of shares of Common Stock beneficially owned by Southridge.

On December 30,2004, Southridge exercised warrants to purchase 568,750 shares of
the Company's common stock at $0.60 per share for proceeds of $341,250. As a
result of this modification of terms, Markland remeasured the fair value of the
Southridge Warrants. Markland determined there was no material incremental value
as a result of this remeasurement.

10.      NET LOSS PER SHARE

Securities that could potentially dilute basic earnings per share ("EPS") in the
future, and that were not included in the computation of diluted EPS because to
do so would have been anti-dilutive for the periods presented, consists of the
following:

                                                              Shares Potentially
                                                                   Issuable
                                                                   --------
Series A Redeemable Convertible Preferred Stock                       10,000
Series D Convertible Preferred Stock (convertible at
   80% of market value)                                           24,767,628
Stock options                                                      7,546,376
Warrants                                                          27,616,049
Employment and consulting agreements                              15,799,126
                                                                 -----------
         Total as of December 31, 2004                            75,739,179
                                                                 ===========

11.      COMMITMENTS AND CONTINGENCIES

Compensation Agreements
-----------------------

Effective January 2003, Markland entered into a one-year compensation agreement
with the former chief executive officer and three three-year agreements with an
officer, the president and chief financial officer, and two consultants to
Markland, Robert Tarini and Verdi Consulting, which provided for aggregate
remuneration of $47,500 per month.

One of these agreements provided for the issuance of 1.67% of Markland's
outstanding common stock in three installments, 50% of the shares were issued on
or about March 21, 2003, 25% of the shares on or about July 1, 2003 and 25% of
the shares on or about October 1, 2003. A final issuance occurred as of December
31, 2003, so that the total amount of shares issued up to December 31, 2003 will
equal 1.67% of the outstanding common stock as of December 31, 2003.

In addition, these three agreements provide in total for the issuance of 5.01%
of the Company's outstanding common stock in four installments on a fully
diluted basis based upon certain performance criteria being met. Upon contract
signing, the Company issued a number of shares of Common Stock then equivalent
to 0.5% of the total number of shares of Common Stock then outstanding,
inclusive of such Employee's/Consultant's Shares; on or about July 1, 2003,
Company will issue to these Employee/Consultants a number of shares of Common
Stock then equivalent to 0.5% of the total number of shares of Common Stock then
outstanding, inclusive of such Employee's/Consultant's Shares if the Second
Quarter gross revenue target has been met; and on or about October 1, 2003
Company will issue to these Employee/Consultants a number of shares of Common
Stock then equivalent to 0.67% of the total number of shares of Common Stock
then outstanding, inclusive of such Employee's/Consultant's Shares, minus the
aggregate number of Shares issued to these parties in the first two installments
if the Third Quarter gross revenue target has been met. If necessary, an
additional issuance will occur in January 2004, so that the total amount of
shares issued will equal 5.01% of the outstanding common stock calculated on a
fully-diluted basis assuming the conversion of all convertible securities as of
December 31, 2003.


                                       24




<PAGE>

All of the shares issuable under these four agreements were earned as of January
1, 2004. Accordingly, a total of 1,410,719 shares were issued, of which 119,360
were issued during the year ended June 30, 2003 and 1,291,359 were issued during
the year ended June 30, 2004.

On May 12, 2004, Markland entered into five-year compensation agreements with
two executives, the chairman and chief executive officer and the president and
chief financial officer, and a consultant, Verdi Consulting. These agreements,
which are effective on January 1, 2004, provide for the following remuneration:

       Base annual remuneration of $300,000 each (an aggregate of $900,000)
       payable over the five-year period ending January 2, 2009;

       Discretionary bonuses over the term of the agreement of up to 300% of
       the base remuneration; and

       Conditional stock grants over the period commencing April 1, 2004 through
       January 2, 2008, based on defined performance criteria. The stock grants,
       if all earned, entitle each of the three parties to receive up to 7.5% of
       Markland's common stock on a fully diluted basis. These grants are earned
       according to the following schedule:

                           Grant 1          2.5%          April 1, 2004
                           Grant 2          1.0%          July 1, 2004
                           Grant 3          1.0%          October 1, 2004
                           Grant 4          1.0%          January 2, 2005
                           Grant 5          1.0%          January 2, 2006
                           Grant 6          0.5%          January 2, 2007
                           Grant 7          0.5%          January 2, 2008

       The number of shares of common stock to be granted on each grant date is
       equal to the product of (a) the number of fully diluted shares
       outstanding at the grant date and (b) the stock percentage associated
       with that grant date.

       In the event of a change in control of Markland during the period covered
       by the agreement, each executive/consultant will automatically be granted
       all remaining stock grants and will be due cash and expense compensation
       for the shorter of (i) three years from the date of the change in
       control, or (ii) until the end of the term of the agreement. A change in
       control is defined by the agreements as a change in the majority
       ownership of the equity of Markland, or the resignation or termination of
       the majority of the board of directors within a two month period, or the
       replacement of the CEO or the President of Markland.

In June 2004, these agreements were modified to remove the anti-dilution
provision. During the six months ended December 31, 2004, a total of 6,637,145
shares of common stock were issued under these new agreements.

In December 2004 these agreements were modified to provide a mechanism whereby
the Company may acquire all or a portion of the Common Stock granted to each
executive/consultant for a nominal sum in the event that their relationship with
the Company terminates prior to the registration of those shares. As part of
this modification, the stock grants were accelerated so that Grants 5 and 6 were
earned on January 2, 2005 and Grants 7 and 8 will be earned on July 1, 2005.

On December 7, 2004, we appointed Gino Pereira as our Chief Financial Officer.
The employment agreement for Mr. Pereira provides for a term of five years,
beginning December 1, 2004. Mr. Pereira's salary is set at $225,000, with a
provision that such salary shall be increased to $300,000 at such time when Mr.
Pereira's duties with the Company preclude him from performing work for other
clients. The employment agreement provides for a grant of 3,000,000 shares of
the Company's Common Stock to Mr. Pereira on the date of signing. These shares
are unregistered shares and were granted in reliance on Section 4(2) of the
Securities Act of 1933. The employment agreement provides for payment to Mr.
Pereira upon a change in control resulting in the voluntary or involuntary
termination of a majority of the board of directors, the chief executive officer
or the president of an amount equal to the lesser of three times his then
current salary or the salary owed through the end of the employment agreement


                                       25




<PAGE>

The employment agreement provides a mechanism whereby the Company may acquire
all or a portion of the Common Stock granted to Mr. Pereira for a nominal sum in
the event that his engagement with the Company is terminated prior to the
registration of those shares. Since August of 2004, Mr. Pereira had been acting
as a paid consultant to us in matters involving finances. As of November 18,
2004, Mr. Pereira had received $62,497 for his consulting services.

On December 7, 2004, we appointed Dr. Joseph P. Mackin as our chief operating
officer. Dr. Mackin was a selling shareholder of EOIR when we purchased it on
June 30, 2004. As part of that transaction, Dr. Mackin received $97,712.15 in
cash and a promissory note for $662,288.00. The employment agreement for Dr.
Mackin provides for a term of five years, beginning January 3, 2005. Dr.
Mackin's salary is set at $300,000. The employment agreement accelerated the
vesting date for options previously granted to Dr. Mackin and provides for
periodic grants of the Company's Common Stock to Dr. Mackin, with an initial
grant of 2,000,000 shares. These shares are unregistered shares and were granted
in reliance on Section 4(2) of the Securities Act of 1933. The employment
agreement provides for an acceleration of stock grants and payment to Dr. Mackin
upon a change in control resulting in the voluntary or involuntary termination
of a majority of the board of directors or the chief executive officer of an
amount equal to the lesser of three times his then current salary or the salary
owed through the end of the employment agreement. The employment agreement
provides a mechanism whereby the Company may acquire all or a portion of the
Common Stock granted to Dr. Mackin for a nominal sum in the event that his
engagement with the Company is terminated prior to the registration of those
shares.

In the six months ended December 31, 2004, Markland recorded unearned
compensation, additional paid-in capital and stock compensation of $6,588,747,
$7,877,690 and $1,288,943 respectively, related to these agreements.

In connection with the STR acquisition, Markland entered into a one year
consulting agreement, as amended on March 17, 2004, with the former President
and principal of STR ("Consultant"). In consideration for the consulting
services to be rendered by Consultant, Markland shall pay to Consultant the sum
of $285,000 (the "fee"). The fee shall be payable as follows: $25,000 is payable
on July 15, 2004, a second payment in the amount of $35,000, is payable on
August 15, 2004, a third payment in the amount of $60,000 is payable on
September 15, 2004, a fourth payment in the amount of $60,000 is payable on
October 15, 2004, a fifth payment in the amount of $60,000 is payable on
November 15, 2004 and the sixth and final payment in the amount of $45,000 is
payable on December 15, 2004. As of December 31, 2004, Markland has accrued
$225,625 related to this agreement.

Resignation of Officers
-----------------------

On November 1, 2004, Gregory A. Williams notified the Board of Directors of
Markland Technologies, Inc. of his resignation from the Board of Directors of
the Company and his positions as Director, Executive Vice President, Chief
Financial Officer, and Chief Operating Officer of the Company's wholly owned
subsidiary, EOIR Technologies, Inc. ("EOIR"). On that date, Mr. Williams, the
Company, and EOIR entered into an Agreement and General Release detailing the
terms and conditions of Mr. Williams' resignation (the "Separation Agreement").
The Separation Agreement states, among other things, that (a) the Company is to
pay Mr. Williams twelve months of severance and all accrued and unused vacation
time, (b) Mr. Williams is entitled to retain all benefits until the earlier of
December 31, 2005 or when Mr. Williams finds new employment, (c) the vesting of
40% of the non-statutory stock options held by Mr. William is accelerated; and
(e) Mr. Williams reaffirms his confidentiality and non-competition obligations
and agrees not to compete with or solicit employees from EOIR for a period of
twelve months. In conjunction with this and other severance agreements with
former EOIR employees, the Company accrued severance costs of $355,000 in the
six months ended December 31, 2004.


                                       26


<PAGE>

Facility Rental
---------------

STR leases its location in Fredericksburg, VA, on a month-to-month basis without
a formal agreement. Rent expense relating to this location was $6,937 per month.
This location was vacated on December 31, 2004.

We have a five year lease for our executive offices of approximately 1,000
square feet located in Ridgefield, Connecticut and a month-to-month lease for a
manufacturing facility of approximately 5,000 square feet located in
Fredericksburg, Virginia. We also have an administrative office in Providence,
RI which is utilized under a monthly sublease comprising approximately 4,000
square feet.

EOIR, our wholly owned subsidiary, holds a four-year lease for its executive and
administrative offices of approximately 5,420 square feet in Woodbridge,
Virginia. The lease, which has an option to renew for an additional three-year
term, expires on September 30, 2005. EOIR also leases approximately 5,000 square
feet in Spotsylvania, Virginia, where it houses its software development unit.
This lease is currently on a month-to-month basis.

We also have several offices located in Fredericksburg, VA. One office with
approximately 4,722 sq ft., with a 1 year lease, one with 1,200 sq ft. with a 5
year lease, one with 10,000 sq ft., with a 5 year lease, and one with 4,200 sq
ft., with a five year lease. Monthly lease amounts for these facilities total
approximately $31,000.

In addition we have a one year lease for an executive office located in Boston,
MA. The monthly lease amount for this facility is approximately $1,600.

Income Taxes
------------

The Company is currently delinquent on its corporate state income tax filings.
The Company expects that its net operating loss carryforwards will be sufficient
to offset any taxable income. As a result, no provision for income taxes or any
related penalties or interest has been recorded for the six months ended
December 31, 2004.

Government Contracts
--------------------

The Company's billings related to certain U.S. Government contracts are based on
provisional general & administrative and overhead rates which are subject to
audit by the contracting government agency.

12.      INCOME TAXES

There was no provision for federal or state income taxes for the six months
ended December 31, 2004 and 2003, due to the Company's operating losses and a
full valuation reserve.

The Company's deferred tax asset before valuation allowance is approximately
$10,300,000 and at December 31, 2004 consisted primarily of net operating loss
carry forwards. The change in the valuation allowance for the six months ended
December 31, 2004 was approximately $3,700,000. When filed, the Company's net
operating loss carry forwards of approximately $25,900,000 will expire in
varying amounts through 2024. The use of the federal net operating loss carry
forwards may be limited in future years as a result of ownership changes in the
Company's common stock, as defined by section 382 of the Internal Revenue Code.
The Company has not completed an analysis of these changes.

The Company has provided a full valuation reserve against the deferred tax asset
because of the Company's loss history and significant uncertainty surrounding
the Company's ability to utilize its net operating loss and tax credit
carryforward.


                                       27




<PAGE>

13.      RELATED PARTY TRANSACTIONS

Robert Tarini, our chief executive officer is also chief executive officer of
Syquest, Inc. Syquest performs software and engineering development for the
Markland Group and provides approximately 4000 sq ft of office space to the
Company in Providence, RI. During the six months ended December 31, 2004 Syquest
provided $213,980 in engineering and software services and charged $36,000 for
rent.

The Company believes that all transactions described above were made on terms no
less favorable to it than those obtainable from unaffiliated third parties. All
future transactions, if any, with its executive officers, directors and
affiliates will be on terms no less favorable to it than those that will be
obtainable from unrelated third parties at the time such transactions are made.

14.      LITIGATION

On June 28, 2004, Charles Wainer filed a civil suit against the Company in the
Circuit Court for Broward County Florida alleging breach of a stock purchase
agreement and breach of an employment agreement stemming from Wainer's sale of
his business to a predecessor of the Company and his subsequent employment
thereat. In the complaint, Wainer alleges Markland owes him $300,000 cash, some
unspecified portion of $700,000 in stock, some unspecified portion of $86,000
cash for lease payments, and approximately $20,000 in back-pay. The Company
believes that these claims are without merit and plans to vigorously defend the
action. On August 11, 2004, answered the complaint and denied any liability.

On or about September 16, 2004, Joseph R. Moulton, Sr. initiated a lawsuit in
the Circuit Court of Spotsylvania County, Virginia, against the Company, EOIR,
our wholly owned subsidiary, and our Chief Executive Officer and Director,
Robert Tarini. Mr. Moulton was the largest single shareholder of EOIR prior to
its acquisition by the Company, owning approximately 67% of the EOIR capital
stock. Mr. Moulton received approximately $5,863,000 in cash and a promissory
note of EOIR in the approximate principal amount of $6,967,000 for his shares of
EOIR at the closing of the acquisition of EOIR by the Company. In his complaint
Mr. Moulton asserts, among other things, that the Company breached its
obligations under the Stock Purchase Agreement, dated June 29, 2004, pursuant to
which the Company acquired EOIR, by terminating Mr. Moulton's employment with
EOIR and removing him from the EOIR board of directors. Mr. Moulton is seeking
damages allegedly suffered by his loss of employment, extreme emotional
distress, and costs incurred to enforce his contractual rights. In addition, he
is seeking certain other equitable relief including, the appointment of a
receiver to oversee the management of EOIR until these promissory notes issued
to former EOIR shareholders at the closing of the acquisition are paid in full
and a declaratory judgment that the Company's actions constitute an event of
default under these promissory notes allowing for the acceleration of all
amounts (approximately $11,000,000) due thereunder. The Company is a guarantor
of these notes. The Company believes that the allegations in this lawsuit are
entirely without merit and expects to file an answer denying Mr. Moulton's
allegations and opposing vigorously all equitable relief sought. The Company is
considering bringing various claims against Mr. Moulton either by counterclaim
or in a separate action.

In addition, we are subject to legal proceedings, claims, and litigation arising
in the ordinary course of business. While the outcome of these matters is
currently not determinable, we do not expect that the ultimate costs to resolve
these matters will have a material adverse effect on our consolidated financial
position, results of operations, or cash flows

On December 7, 2004, the Company issued 152,778 shares of its Common Stock in
settlement of a civil suit filed against Quest Net, Inc., a predecessor company
to Markland, for the non-payment of a promissory note valued at $66,671.


15.      SUBSEQUENT EVENTS

Subsequent Litigation Events
----------------------------

On January 31, 2005, the trial began in the action between Charles Wainer and
Markland in the Circuit Court for Broward County, Florida. On that day, the
presiding judge in the matter referred the parties to mediation.


                                       28




<PAGE>

Subsequent common stock issuances
---------------------------------

Subsequent to December 31, 2004, executives and consultants of the company were
issued 14,319,237 shares of common stock based on employment agreements.

Subsequent to December 31, 2004, additional warrants were exercised to purchase
7,225,000 shares of the Company's common stock at $0.60 per share for proceeds
of $4,335,000.

Preferred Stock Restriction Agreement
-------------------------------------

On January 5, 2005, the Company entered into a preferred stock restriction
agreement (the "Agreement") with James LLC (the "Series D Holder"), to restrict
the sale of shares of the Company's series D cumulative convertible preferred
stock and shares of the Company's common stock, par value $0.0001 per share
issuable upon conversion of the Series D Preferred Stock (the "Conversion
Shares" and, collectively with the Series D Preferred Stock, the "Subject
Securities").

Specifically, subject to the terms and conditions contained in the Agreement,
the parties have agreed that the Series D Holder will not transfer or dispose of
any of the Subject Securities prior to March 15, 2005. Beginning on March 15,
2005, the Series D Holder may sell its Conversion Shares in broker's
transactions subject to Rule 144 promulgated under the Securities Act of 1933.
However, beginning on June 15, 2005, the Series D Holder's sales of the
Conversion Shares shall be limited to sales of not more than $600,000 per
calendar month. Beginning on September 13, 2005, the monthly limit on the Series
D Holder's sales of the Conversion Shares shall be increased to $750,000 per
calendar month.

The Agreement calls for the Company to enter into a Private Equity Credit
Agreement with an investor, Brittany Capital Management, Ltd., for an equity
line of credit in the amount of $10,000,000. The Equity Line shall be subject to
certain conditions enumerated in Section 4.8 of that certain Purchase Agreement,
dated September 21, 2004, between the company and investors named therein. The
Company is required, within twenty-one (21) days of the execution of the Private
Equity Credit Agreement, to file a registration statement with the Securities
and Exchange Commission (the "SEC") providing for the resale by the Investor of
the shares of Common Stock sold to the Investor pursuant to the Equity Line. In
the event that the Equity Line Registration Statement has not been declared
effective by the SEC prior to June 15, 2005, the Company shall pay a cash
penalty of $50,000 per month to the Investor.

In connection with the execution of the Agreement, the Company agreed to issue
warrants to purchase one million eighty-eight thousand one hundred sixty
(1,088,160) shares of Common Stock as set forth in the Lock-Up agreement with
the Series D Holder dated September 21, 2004, at an exercise price of $0.60 per
share. The Series D Holder is entitled to have the shares subject to these
warrants included in the first registration statement filed by the Company with
the SEC following the Equity Line Registration Statement. These warrants are
unregistered securities and are being issued in reliance on Section 4(2) of the
Securities Act of 1933.

On January 4, 2005, we entered into an agreement with David Stefansky to amend
the terms of a warrant issued (the "Stefansky Warrant") to him on September 21,
2004 as compensation for consulting services performed by Stefansky in
connection with our September 21, 2004, private placement for the purchase of up
to 375,000 shares of our common stock. Specifically, subject to the terms and
conditions contained in the Stefansky Amendment, the parties have agreed:

         o        To amend the Stefansky Warrant so that Stefansky may exercise
                  all or any portion of the Stefansky Warrant for an exercise
                  price of $0.60 per share of Common Stock, from January 4,
                  2005, until January 7, 2005.

         o        That Stefansky shall exercise all of the of the Stefansky
                  Warrant, as amended, on or before the close of business on
                  January 7, 2005.


                                       29




<PAGE>

         o        That the number of shares of Common Stock subject to the
                  Stefansky Warrant shall not be adjusted as a result of the
                  temporary reduction in exercise price.

On January 5, 2005, warrants for 375,000 shares of common stock were exercised
for proceeds of $225,000.

Warrant Amendments with DKR Soundshore Holding Fund, Ltd. and DKR Soundshore
----------------------------------------------------------------------------
Strategic Holding Fund, Ltd.
---------------------------

On February 7, 2005, the Company entered into agreements with DKR Soundshore
Holding Fund, Ltd. DKR Soundshore Strategic Holding Fund, Ltd. ("DKR"), to
reduce the exercise price of replacement warrants ("Replacement Warrants")
issuable to DKR pursuant to the Amendment to Warrants between the Company and
DKR dated December 28, 2004 (the "Amendment") (see Note 9). Pursuant to the
Amendment, the Company agreed to issue to DKR new warrants to purchase a number
of shares of the Company's common stock, $.0001 par value per share ("Common
Stock"), at an exercise price of $1.50, equal to the number of shares of Common
Stock purchased by DKR prior to March 1, 2005 pursuant to the terms of the
Amendments. Specifically, subject to the terms and conditions in the Agreements,
the parties have agreed:

         o   That DKR shall purchase no less than an aggregate of 1,500,000
             shares of Common Stock by exercising Common Stock Purchase Warrant,
             as amended, no later than February 7, 2005.

         o   That the exercise price of the Replacement Warrants issued to DKR
             pursuant to the Amendments shall be reduced from $1.50 per share to
             $0.50 per share.

         o   That DKR waives any default or potential default that the
             Amendments may otherwise have caused under those certain Secured 8%
             Convertible Notes made by the Company and payable to DKR executed
             in connection with the September 21, 2004, private placement, and
             any other defaults under the other transaction contracts and
             agreements between DKR and the Company that may arise out of the
             Amendments.

The parties have further agreed that DKR shall have piggy-back registration
rights with regard to the shares of Common Stock underlying the Replacement
Warrants.

Issuance of Warrants to Purchase Common Stock
---------------------------------------------

         On February 7, 2005, the Company issued warrants to purchase five
hundred sixty-eight thousand seven hundred fifty (568,750) shares of Common
Stock to Southridge Partners LP, warrants to purchase one million six hundred
twenty-five thousand (1,625,000) shares of Common Stock to Harborview Master
Fund LP, warrants to purchase three hundred seventy-five thousand (375,000)
shares of Common Stock to Richard Rosenblum, and warrants to purchase three
hundred seventy-five thousand (375,000) shares of Common Stock to David
Stefansky (collectively, the "Warrants"). The Warrants entitle the holders
thereof to purchase an aggregate two million nine hundred forty-three thousand
seven hundred fifty (2,943,750) shares of Common Stock at an exercise price of
$0.60 per share at any time and from time to time through, February 7, 2010.

         The Warrants contain a provision granting certain piggy-back
registration rights to the holders of the Warrants for the shares of Common
Stock underlying the Warrants.

         The Company received no consideration for the issuance of the Warrants.
The offer and sale of the Warrants was made in reliance on Section 4(2) of
Securities Act of 1933, as amended. Southridge Partners LP, Harbarview Master
Fund LP, Richard Rosenblum and David Stefansky are stockholders of the Company
and "accredited investors" within the meaning of Regulation D.


                                       30


<PAGE>

ACQUISITION

On February 14, 2005, Markland entered into definitive agreements with Technest
Holdings, Inc., a Nevada corporation ("Technest"), a public company with no
revenue and minimal assets and operations, Genex Technologies, Inc. ("Genex"),
and the certain investors, which resulted in Markland acquiring controlling
interests in Technest simultaneous with and conditioned upon the Technest
acquisition of Genex. In accordance with the terms of the Markland Securities
Purchase Agreement on February 14, 2005, Technest issued a controlling interest
to Markland in exchange for 10,168,764 shares of Markland common stock and
Markland agreed to issue additional shares of common stock upon conversion of
Technest's Series B Preferred Stock. Immediately after the acquisition by
Markland of a controlling interest in Technest, certain investors paid
$5,000,000 in cash for shares of Technest Series B Preferred Stock, five-year
warrants to purchase Technest common stock, and shares of Technest Series C
Convertible Preferred Stock. The acquisition of Genex was effected pursuant to
an Agreement and Plan of Merger dated February 14, 2005, by and among Markland,
Technest, Mtech Acquisition, Inc. ("MTECH"), a wholly-owned subsidiary of
Technest, Genex and Jason Geng, the sole stockholder of Genex. As a result of
the merger, all of the outstanding shares of the capital stock of Genex were
automatically converted into the right to receive in the aggregate (i) $3
million; (ii) 10,168,764 shares of Markland's common stock (the shares of
Markland common stock issued to Technest); and (iii) if earned, contingent
payments in the form of additional shares of Technest common stock. In addition,
Mr. Geng received a six month unsecured promissory note in the principal amount
of $276,317 that pays interest at the rate of 6% per annum.

Genex is a supplier of advanced imaging, surveillance and security sensor
technologies. The impact of this acquisition has not been determined at this
time.


                                       31




<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION WITH THE
OTHER FINANCIAL INFORMATION AND CONSOLIDATED FINANCIAL STATEMENTS AND RELATED
NOTES APPEARING ELSEWHERE IN THIS FORM 10-QSB, FOR THE QUARTER ENDED DECEMBER
31, 2004. THIS DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS
AND UNCERTAINTIES. OUR ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE
ANTICIPATED IN THE FORWARD-LOOKING STATEMENTS AS A RESULT OF A VARIETY OF
FACTORS. READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON ANY
FORWARD-LOOKING STATEMENTS CONTAINED IN THIS QUARTERLY REPORT ON FORM 10-QSB,
FOR THE QUARTER ENDED DECEMBER 31, 2004. WE WILL NOT UPDATE THESE
FORWARD-LOOKING STATEMENTS UNLESS THE SECURITIES LAWS AND REGULATIONS REQUIRE US
TO DO SO.

The following management's discussion and analysis of financial condition and
results of operations is organized as follows:

         o        OVERVIEW. This section provides a general description of
                  Markland, its business and recent developments and events that
                  have occurred since 2002 that we believe are important in
                  understanding the results of operations and financial
                  condition and to anticipate future trends.

         o        RESULTS OF OPERATIONS. This section provides an analysis of
                  Markland's results of operations for the fiscal quarters and
                  six months ended December 31, 2004 and December 31, 2003. This
                  analysis is presented on a consolidated basis.

         o        LIQUIDITY AND CAPITAL RESOURCES. This section provides an
                  analysis of Markland's cash flows for the six months ended
                  December 31, 2004 and December 31, 2003.

         o        CRITICAL ACCOUNTING POLICIES. This section discusses certain
                  critical accounting policies that we consider important to
                  Markland's financial condition and results of operations, and
                  that required significant judgment and estimates on the part
                  of management in application. Markland's significant
                  accounting policies, including the critical accounting
                  policies discussed in this section, are summarized in the
                  notes to the accompanying consolidated financial statements.

OVERVIEW

BACKGROUND

GENERAL. We provide to the United States Department of Defense ("DOD") and to
various other United States Intelligence Agencies ("INTEL"); remote sensing
technology products, and services to protect our country's military personnel
and infrastructure assets. We also provide to the Department of Homeland
Security ("Homeland Security"); products, services and emerging technologies to
protect our country's borders, infrastructure assets and personnel. Our mission
is to build world-class integrated solutions for the Homeland Security, DOD and
INTEL marketplaces via expansion of our existing contracts, development of our
emerging technologies and acquisition of synergistic revenue producing assets.
We have undergone material changes to our business and our financial structure
during the period covered by the financial statements included in this Form
10-QSB as amended. Our business, as it exists today, consists of four business
areas: remote sensor systems for military and intelligence applications,
chemical detection, border security and advanced technologies. Our primary
sources of operating revenue are from our wholly owned subsidiary EOIR
Technologies, Inc. ("EOIR"), which was acquired by us on June 29, 2004. EOIR
offers products and services which include; (i) design and fabrication of
customized remote sensor systems and platforms for DOD, INTEL and Homeland
Security applications; (ii) remote sensor data collection, data signal
processing and data exploitation; and (iii) training in the use of remote sensor
systems and data. These efforts involve systems engineering, system integration,
prototyping, manufacturing and field data collections as well as data analysis
and processing. Prior to the acquisition of EOIR, our primary sources of
operating revenue were sales of our automatic chemical agent detection and alarm
system produced by our wholly owned subsidiary Science and Technology Research
Inc. ("STR"), border security logistics products and services provided by our
wholly owned subsidiary Ergo Systems, Inc. ("ERGO"), and Small Business
Investment Research ("SBIR") funded research grants for the development of gas
plasma antenna technology.


                                       32




<PAGE>

MARKLAND BUSINESS

REMOTE SENSOR SYSTEMS FOR MILITARY AND INTELLIGENCE APPLICATIONS

Our acquisition of EOIR on June 29, 2004, a company which provides remote
sensing technology products and Services to the United States Department of
Defense and to various other United States Intelligence Agencies, is a very
important part of our ongoing business strategy of creating a world-class
integrated portfolio of solutions for the Homeland Security, DOD and INTEL
marketplaces. EOIR's most significant source of revenues is an Omnibus Contract
with the United States Army Night Vision and Electronic Sensors Directorate
which has a total potential value of approximately $406 million over its five
year period of performance. Approximately 86% of EOIR revenues for its fiscal
year ended December 31, 2004, were derived from this contract. The Omnibus
Contract has an extensive and varied scope that requires us to provide a very
broad range of products and technical services. For those products and technical
services that EOIR does not possess in-house, we have and continue to
subcontract to our team members and other subcontractors as necessary.

CHEMICAL DETECTOR

In October 2003, our subsidiary, Security Technology, Inc., acquired all of the
common stock of Science and Technology Research, Inc., a chemical detector
manufacturer, as part of our ongoing business strategy of creating an integrated
portfolio of homeland security solutions. STR has a contract with the U.S. Navy
to be the sole producer of the U.S. Navy's shipboard Automatic Chemical Agent
Detection and Alarm System used to detect all classic nerve and blister agents
as well as other chemical warfare agent vapors. STR's sole source of revenues is
this contract with the United States Navy which has a total potential value of
approximately $37,000,000 over its period of performance. As of June 30, 2004,
we had completed delivery pursuant to all outstanding orders under this
contract. We are experiencing a decline in demand for our chemical detector unit
from the U.S. Navy. We plan to compensate for this reduced demand by marketing
this technology to new customers within the Homeland Security marketplace and by
combining it with other technologies for sale to customers other than the US
Navy. During the six months ended December 31, 2004 our subsidiary STR
recognized approximately $ 428,851 of revenue from this contract. We are
presently working on the design of a next generation "point" chemical detector
product, which will also operate using Ion Mobility Spectrography (IMS) cell
technology and provide networked wireless communication capability.

On December 23, 2003, the U.S. Navy signed a ten-year non-exclusive license
agreement with us to transfer certain chemical detection technology intellectual
property rights to us. We believe the license will allow us to further expand
the applications for the "point" chemical detection technology and market the
technology to non-defense customers such as foreign governments and commercial
entities. The company is combining "stand off" chemical detection technologies
from EOIR which are based on hyper spectral infra red technology with the
"point" chemical detection technology of STR which is based on Ion Mobility
Spectroscopy. This integrated and combined chemical detection capability we
believe will accelerate penetration into new markets for the chemical detection
products we now offer and will help to increase our revenues in the next fiscal
year for chemical detection products.

BORDER SECURITY

We acquired the assets of Ergo Systems, Inc., in January 2003. This acquisition
provided us with contracts with the Department of Homeland Security to maintain,
integrate, and implement design enhancements to border security systems
installed at U.S. ports of entry for the Dedicated Commuter Lane, which is part
of a larger U.S. Customs and Immigration and Naturalization Service initiative
to reduce wait times, improve data accuracy, and improve overall efficiencies at
all border crossings for both freight and passengers. During the fiscal year we
entered into a teaming agreement with Accenture, who was recently awarded the US
VISIT Contract. The purpose of this contract is to secure our borders and
expedite the entry/exit process while enhancing the integrity of our immigration
system and respecting the privacy of visitors to the US. We have recently been
awarded a subcontract which enables the company to derive revenues from the US
VISIT Contract. During the six months ended December 31, 2004 our subsidiary
Ergo Systems, Inc. recognized approximately $227,590 of revenue from these
contracts. Management believes that the potential for increased revenues has
been greatly enhanced by this subcontract award.


                                       33




<PAGE>

ADVANCED TECHNOLOGIES

Through research and development as well as intellectual property acquisitions,
we have established a portfolio of advanced and emerging technologies, which we
intend to commercialize and utilize within our own proprietary products or
license out for the purpose of revenue generation. These advanced technologies
and intellectual property are as follows:

         o        Gas plasma antenna,
         o        Vehicle stopping system,
         o        Acoustic Core(TM) signature analysis,
         o        APTIS(TM) human screening portal, and
         o        Cryptography software.

Of these five advanced technologies we believe that the nine issued and pending
U.S. patents related to gas plasma antenna technology with demonstrated
applications in the fields of ballistic missile defense, phased array radar, and
forward deployed decontamination have the most demonstrated potential to create
future sustained revenue streams.

COMPANY HISTORY

EVENTS PRIOR TO FISCAL 2002.

Markland, previously known as Quest Net, was incorporated in Colorado in
November 1995, under the name "A.P. Sales Inc." In December 1998, A.P. Sales
Inc. dissolved as a Colorado corporation, redomiciled in Florida and changed its
name to Quest Net Corp. In 2001 our only asset was the stock of a subsidiary,
CWTel, Inc. ("CWTel"), a company in the telecommunications business. We acquired
this company in March 2000 and secured our payment obligations with 30,000
shares of our Series A Non-Voting Redeemable Convertible Preferred Stock. CWTel
filed for bankruptcy and was liquidated on March 11, 2002. After the bankruptcy
of our subsidiary, we had no active business operations. On June 30, 2003, we
issued 30,000 shares of our Series A Non-Voting Redeemable Convertible Preferred
Stock in satisfaction of our remaining obligations to the holder of the security
interest. On March 15, 2001, we acquired all the outstanding capital stock of a
company called Vidikron of America, Inc. ("Vidikron"), a development stage
company in the business of creating digital broadband and wireless networking
solutions for the internet. The sole stockholder of Vidikron was Markland LLC.
To acquire Vidikron we issued 10 shares of our convertible Series B Preferred
Stock to Markland LLC. Markland LLC converted all of its Series B Preferred
Stock in June 2001, which, resulted in Markland LLC owning approximately 85% of
our then outstanding common stock. There is no Series B Preferred Stock
outstanding. At this time we changed our name to Markland Technologies, Inc. On
October 19, 2000 we executed a promissory note for $3,500,000 in favor of James
LLC. In July 2001, after the Vidikron acquisition, James LLC elected to convert
$2,500,000 of the principal amount of its $3,500,000 promissory note, together
with $125,000 accrued interest, into shares of our common stock. In September
2001, we assumed all of Vidikron's rights and obligations under a $3,500,000
secured revolving credit facility with Market LLC. These transactions made
Market LLC our senior secured lender.

EVENTS DURING FISCAL 2002.

In May 2002, we received a notice of default from Market LLC. In June of 2002,
we transferred all the stock of Vidikron to Market LLC in partial satisfaction
of our indebtedness to Market LLC. After this partial payment, we still owed
Market LLC $500,000. Our disposition of the business of Vidikron was treated as
a discontinued operation. As a result, we recorded a loss of $3,259,421 for the
fiscal year ended June 30, 2002 resulting from discontinued operations. At this
point in our history we again had no active business operations. In fiscal 2003,
we recorded a gain of $998,713 resulting from the settlement of certain
liabilities and obligations recorded in previous periods in connection with the
discontinued operations.

EVENTS DURING FISCAL 2003

In December 2002, we entered into a transaction with Eurotech Ltd., ipPartners,
Inc., Market LLC, and James LLC. Pursuant to this transaction, the following
took place:


                                       34




<PAGE>

         o        We formed a subsidiary corporation called Security
                  Technology,Inc.
         o        Eurotech transferred certain rights to its Acoustic Core
                  Technology(TM) to our subsidiary.
         o        Crypto.com Inc. (a subsidiary of Eurotech) and ipPartners,
                  Inc. transferred certain rights to their cryptology
                  technologies to our subsidiary.
         o        90% of the shares of our common stock held by Market LLC and
                  James LLC were retired.
         o        We issued shares of common stock representing 80% of our then
                  issued and outstanding common stock to Eurotech, Ltd. and
                  shares of common stock representing 10% of our then issued and
                  outstanding shares of common stock to ipPartners, Inc.
         o        We issued $5,225,000 in stated value of our Series C 5%
                  Cumulative Convertible Preferred Stock to Market LLC and James
                  LLC in satisfaction of $5,225,000 of convertible notes held by
                  Market LLC and James LLC and in exchange for their agreement
                  to surrender 4,498,638 shares of our common stock.

We are not a majority-owned subsidiary of Eurotech, Ltd. due to the issuances of
additional common stock. In January of 2003, we acquired all of the common stock
of Ergo Systems, Inc. ("Ergo"), a provider of security logistic support and
related product development services. Ergo has a contract with the United States
government to provide border security logistic support at five ports of entry.
In consideration for this acquisition, we agreed to pay $400,000 in cash,
payable at certain milestones related to our research efforts. During the year
ended June 30, 2004, we recognized $955,736 from these services. In March of
2003, we entered into an agreement to acquire the intellectual property
(including patents), equipment and government contracts relating to our gas
plasma antenna technology from ASI Technology Corporation, but this transaction
did not close until September 30, 2003. In consideration for this acquisition we
issued 283,333 shares of common stock valued at $850,000 and agreed to pay
$150,000. During the year ended June 30, 2004, we recognized revenue of $261,479
from SBIR research grants related to this technology.

EVENTS DURING FISCAL 2004.

In October of 2003, we acquired all of the common stock of Science and
Technology Research Corporation, Inc. ("STR"). This company is the producer of
the U.S. Navy's shipboard automatic chemical agent detection and alarm system.
In consideration for this acquisition, we issued 1,539,779 shares of common
stock valued at $5,100,000 and paid $900,000 in cash, and issued a promissory
note for $375,000. During the year ended June 30, 2004, we recognized revenue of
$4,796,715 from sales of our automatic chemical agent detection and alarm system
to the U.S. Navy. We also entered into a consulting agreement with the former
principal shareholder and employee. On June 29, 2004, we acquired all of the
outstanding stock of EOIR for $8,000,000 in cash and $11,000,000 in principal
amount of five year notes secured by the assets and stock of EOIR. EOIR is a
provider of technology and services to the United States Army Night Vision and
Electronic Sensors Directorate and has expertise in wide area remote sensing
using both electro-optic and infrared technologies. Markland intends to continue
to use the assets of EOIR for this purpose. We expect that EOIR will represent a
majority of Markland's revenues going forward. We expect that these sensor
science products will be our most significant revenue producing business.

FINANCING ACTIVITIES.
We have financed our business activities through borrowings and private
placements of our securities to institutional investors. We have engaged in the
following financing activities: o In October 2003, we borrowed $1,400,000 from
Bay View Capital, LLC. This borrowing was repaid in April 2004.

         o        At various times between April 2003 and March 2004 we have
                  raised an aggregate of approximately $3,832,000 through
                  private placements of our Series D Preferred Stock to an
                  institutional investor.
         o        On April 2, 2004, we sold 3,333,333 shares of common stock and
                  warrants to purchase 3,333,333 shares of our common stock for
                  gross proceeds of $2,000,000 to three investors in a private
                  placement.
         o        On April 16, 2004, we sold 2,500,000 shares of our common
                  stock and warrants to purchase 2,500,000 shares of our common
                  stock for gross proceeds of $2,000,000 to ten investors in a
                  private placement.


                                       35




<PAGE>

         o        On May 3, 2004, we sold 7,098,750 shares of our common stock
                  and warrants to purchase 7,098,750 shares of our common stock
                  for gross proceeds of $5,679,000 to 34 investors in a private
                  placement.
         o        As of April 2004, all of our Series C Cumulative Convertible
                  Preferred Stock has been converted into common stock and none
                  remains outstanding.
         o        On June 30, 2004, we sold 3,500 shares of Series D Preferred
                  Stock to an institutional investor for $2,000,000 in
                  connection with the acquisition of EOIR.

EVENTS AFTER FISCAL 2004
------------------------

         o        On September 21, 2004, we sold secured convertible promissory
                  notes and warrants to purchase shares of common stock to two
                  institutional investors for approximately $4,000,000.
         o        On November 9, 2004, we sold secured convertible promissory
                  notes and warrants to purchase shares of common stock to two
                  institutional investors for approximately $1,350,000.
         o        On December 7, 2004 we issued warrants to purchase an
                  aggregate 4,400,000 shares of our common stock to Trilogy
                  Capital Partners and a finder in compensation for publicity
                  and marketing services.
         o        On December 28, 2004, we entered into agreements with two
                  institutional investors to amend the terms of warrants issued
                  to them for the purchase of up to 5,950,000 shares of our
                  common stock, $0.0001 par value per share. As of December 31,
                  2004, 1,968,750 of these warrants were converted under these
                  revised agreements for net proceeds of $1,181,250.

RECENT EVENTS
--------------
         o        Subsequent to December 31, 2004, executives and consultants of
                  the company were issued 14,319,237 shares of common stock
                  based on employment agreements.
         o        Subsequent to December 31, 2004, additional warrants were
                  exercised to purchase 7,225,000 shares of the Company's common
                  stock at $0.60 per share for proceeds of $4,335,000.
         o        On February 14, 2005, Markland entered into definitive
                  agreements with Technest, a public company with no revenue and
                  minimal assets and operations, Genex Technologies, Inc.
                  ("Genex"), and the certain investors, which resulted in
                  Markland acquiring controlling interests in Technest
                  simultaneous with and conditioned upon the Technest
                  acquisition of Genex. In accordance with the terms of the
                  Markland Securities Purchase Agreement on February 14, 2005,
                  Technest issued a controlling interest to Markland in exchange
                  for 10,168,764 shares of Markland common stock and Markland
                  agreed to issue additional shares of common stock upon
                  conversion of Technest's Series B Preferred Stock. Immediately
                  after the acquisition by Markland of a controlling interest in
                  Technest, certain investors paid $5,000,000 in cash for shares
                  of Technest Series B Preferred Stock, five-year warrants to
                  purchase Technest common stock, and shares of Technest Series
                  C Convertible Preferred Stock. The acquisition of Genex was
                  effected pursuant to an Agreement and Plan of Merger dated
                  February 14, 2005, by and among Markland, Technest, Mtech
                  Acquisition, Inc. ("MTECH"), a wholly-owned subsidiary of
                  Technest, Genex and Jason Geng, the sole stockholder of Genex.
                  As a result of the merger, all of the outstanding shares of
                  the capital stock of Genex were automatically converted into
                  the right to receive in the aggregate (i) $3 million; (ii)
                  10,168,764 shares of Markland's common stock (the shares of
                  Markland common stock issued to Technest); and (iii) if
                  earned, contingent payments in the form of additional shares
                  of Technest common stock. In addition, Mr. Geng received a six
                  month unsecured promissory note in the principal amount of
                  $276,317 that pays interest at the rate of 6% per annum.
         o        Subsequent to December 31, 2004 we issued warrants to purchase
                  2,943,750 shares of our Common Stock at an exercise price of
                  $0.60


                                       36




<PAGE>

Genex is a supplier of advanced imaging, surveillance and security sensor
technologies. The impact of this acquisition has not been determined at this
time.

RESULTS OF OPERATIONS

REVENUE:

Revenue for the quarter ended December 31, 2004 increased by 423% to $17,044,677
compared to $3,256,771 for the same period in 2003, which was prior to our
acquisition of EOIR. Revenue for the six months ended December 31, 2004
increased by 821% to $32,814,528 compared to $3,563,495 for the same period in
2003, which was prior to our acquisition of EOIR. Our EOIR subsidiary accounted
for approximately 97% of these revenues in the six months ended December 31,
2004.

EOIR's most significant source of revenues is a contract with the United States
Army Night Vision and Electronic Sensors Directorate. Approximately 84% of our
revenues were received from this contract. We expect orders to continue at or
above current levels under this contract, however, no assurance can be given
that this will be the case.

COST OF REVENUES:

Cost of revenues for the quarter ended December 31, 2004 increased by 540% to
$13,283,832, compared to $2,072,625 for the same period in 2003. Cost of
revenues for the six months ended December 31, 2004 increased by 1,004% to
$25,726,725, compared to $2,329,581 for the same period in 2003. Cost of
revenues increased as a result of an increase in sales resulting from our
acquisition of EOIR.

Gross profits for the quarter ended December 31, 2004 increased by 218% to
$3,760,845 compared to $1,184,146 for the same period in 2003. Gross profits for
the six months ended December 31, 2004 increased by 474% to $7,087,803 compared
to $1,233,914 for the same period in 2003.

Gross profits increased as a result of additional revenue from the acquisition
of EOIR. Gross profit as a percentage of revenue for both the quarter and six
months ended December 31, 2004 was approximately 22% compared to 35% for the
same period in 2003. Most of our revenues for the quarter and six months ended
December 31, 2003 were derived from product sales. After our acquisition of EOIR
most of our revenues for the quarter and six months ended December 31, 2004 are
from variable cost contracts which enjoy greater certainty of profit, compared
to fixed price contracts, but at lower profit margins. It is our intention to
create a balanced portfolio of contracts as revenues from Markland group
companies mature.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES:

Selling, general and administrative expense for the quarter ended December 31,
2004 increased by 708% to $5,157,465 compared to $638,376 in the same period in
2003. Selling, general and administrative expense was primarily composed of
payroll, consultants, legal and accounting fees, and vendors. The increase in
selling, general and administrative expense was primarily due to increases in
staff resulting from the acquisition of EOIR and increases due to related sales
growth. There was also a provision for severance payments for certain staff at
EOIR amounting to $355,000. As a result of the recent acquisition and funding
activity of the company, legal and accounting expenses relating to SEC filings
increased substantially and were approximately $700,000 for the quarter ended
December 31,2004.

Selling, general and administrative expense for the six months ended December
31, 2004 increased by 668% to $8,728,505 compared to $1,136,188 in the same
period in 2003.

RESEARCH AND DEVELOPMENT:

During the quarter and six months ended December 31, 2004, we spent $110,267 on
research and development activities compared to no expenditure for the quarter
and six months ended December 31, 2003


                                       37




<PAGE>

COMPENSATORY ELEMENT OF STOCK ISSUANCES FOR SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES:

Compensatory element of stock issuances for selling, general and administrative
expenses for the quarter ended December 31, 2004 increased by 98% to $2,254,566
compared to $1,137,162 for the same period in 2003. For the six months ended
December 31, 2004 the charge for compensatory element of stock issuances
increased by 46% to $2,253,423 compared to $1,539,142 for the same period in
2003.

These charges include amortization and mark-to-market adjustments on unearned
stock compensation. We use our equity as a non-cash method of compensating
management and consultants who provide services to us and expect to continue to
do so in the future.

OPERATING LOSS:

Loss from operations for the quarter ended December 31, 2004 increased by 523%
to $4,412,710 compared to $708,059 for the comparative period in 2003. This loss
resulted primarily from non-cash charges for the compensatory element of stock
issuances, losses on disposals of equipment and amortization of intangible
assets resulting from our recent acquisitions. These non-cash charges amounted
to $2,905,823 for the three months ended December 31, 2004. Loss from operations
for the six months ended December 31, 2004 increased by 224% to $5,161,363
compared with $1,591,417 for the same period in 2003. Non-cash charges for the
compensatory element of stock issuances, losses on disposals of equipment and
amortization of intangible assets resulting from our recent acquisitions
amounted to $3,410,394 for the six months ended December 31, 2004.

INTEREST EXPENSE:

Interest expense for the quarter ended December 31, 2004 increased substantially
to $3,604,187 compared to $119,150 for the quarter ended December 31, 2003. The
non-cash element of these interest charges amounted to $3,309,862. Interest and
financing expense was from notes payable issued for bridge financing, and other
financing costs. These charges represent the accretion of debt discount to the
fair market value of the notes and amortization of deferred financing costs over
the term of the convertible notes. We issued two convertible notes on September
21, 2004 and November 9, 2004. As this short-term financing has a term of one
year, these charges are accreted over a relatively short period of time
resulting in substantial non-cash interest charges. We expect such charges to
recur during the life of these notes. In connection with our acquisition of
EOIR, EOIR issued, and we guaranteed, $11,000,000 in original principal amount
of notes due to the former stockholders of EOIR. These notes bear interest at
the rate of six (6%) percent per annum and must be repaid within the next five
years. The carrying value of these notes is $9,678,840 at December 31, 2004.
Interest expense for the six months ended December 31, 2004 was $4,107,402
compared to $147,728 for the six months ended December 31, 2003. The non-cash
element of this expense was $3,624,028 for the six months ended December 31,
2004.

PREFERRED STOCK DIVIDENDS:

There were no Preferred Stock dividends for the quarter and six months ended
December 31, 2004. All of Series C Preferred Stock has been converted. As a
result none is outstanding. Preferred Stock dividends for the quarter ended
December 31, 2003 were $161,101. Preferred Stock dividends for the six months
ended December 31, 2003 were $316,790

NET LOSS APPLICABLE TO COMMON STOCKHOLDERS:

Net loss applicable to common stockholders for the quarters ended December 31,
2004 and December 31, 2003 was $8,007,192 ($0.15 per share) and $988,310 ($0.16
per share) respectively. Our weighted average number of shares outstanding for
the quarters ended December 31 2004 and December 31, 2003 were 52,408,699 and
6,156,120, respectively.

Net loss applicable to common stockholders for the six months ended December 31,
2004 and December 31,2003 was $9,253,213 ($0.20 per share) and $2,055,935 ($0.38
per share) respectively. Our weighted average number of shares outstanding for
the six months ended December 31 2004 and December 31, 2003 were 45,380,646 and
5,463,757, respectively.


                                       38




<PAGE>

The reduction in net loss per share from the prior period is due primarily to
the increase in number of shares outstanding. Shares outstanding increased
primarily as a result of our financing activities.

LIQUIDITY AND CAPITAL RESOURCES

During the six months ended December 31, 2004, we experienced $194,896 of
positive cash flow from operating activities compared with a deficit of $884,314
for the same period in 2003. The loss for the six months ended December 31 of
$9,253,213 was offset by non-cash charges of $7,241,673 and a reduction in
working capital of $2,206,436. On June 29, 2004, we acquired all of the
outstanding stock of EOIR for $8,000,000 in cash and $11,000,000 in principal
amount of five year notes secured by the assets and stock of EOIR. These notes
bear interest at the rate of six (6%) percent per annum and must be repaid
within the next five years. The carrying value of these notes is $9,678,840
at December 31, 2004. On September 21, 2004, we sold secured convertible
promissory notes and warrants for the aggregate consideration of $4,000,000 and
in the aggregate principal amount of $5,200,000. These notes accrue interest at
the rate of eight percent (8%) per annum and are due and payable within one
year. The carrying value of this note is $2,677,389 at December 31, 2004 and the
discount to the principal amount will be accreted to interest expense over the
one year term of the loan. On November 9 2004, we sold secured convertible
promissory notes and warrants for the aggregate consideration of $1,350,000 and
in the aggregate principal amount of $1,755,000. These notes accrue interest at
the rate of eight percent (8%) per annum and are due and payable within one
year. The carrying value of this note is $75,808 at December 31, 2004 and the
discount to the principal amount will be accreted to interest expense over the
one year term of the loan. Between January 1, 2005 and February 10, 2005,
additional warrants were exercised to purchase 7,225,000 shares of the Company's
common stock at $0.60 per share for proceeds of $4,335,000. We believe that
required investment capital will be available to us, but there can be no
assurance that we will be able to raise funds on terms acceptable to us, or at
all. We have the ability to adjust the level of research and development and
selling, general and administrative expenses to some extent based on the
availability of resources. However, reductions in expenditures could delay
development and adversely affect our ability to generate future revenues. Any
stock-based sources of additional funds could be dilutive to existing equity
holders and the dilution could be material. The lack of sufficient funds from
operations or additional capital could force us to curtail or scale back
operations and would therefore have an adverse effect on our business. Other
than cash and cash equivalents, we have no unused sources of liquidity at this
time. We expect to incur additional operating losses as a result of expenditures
for research and development and marketing costs for our security products and
technologies. The timing and amounts of these expenditures and the extent of our
operating losses will depend on many factors, some of which are beyond our
control. Accordingly, there can be no assurance that our current expectations
regarding required financial resources will prove to be accurate. We anticipate
that the commercialization of our technologies may require increased operating
costs; however, we cannot currently estimate the amounts of these costs.

GOING CONCERN

For six months ended December 31, 2004 and December 31, 2003, we incurred a net
loss applicable to common stockholders of $9,253,213 and $2,055,935
respectively. We have limited finances and require additional funding in order
to market and license our products. There is no assurance that we can reverse
our operating losses, or that we can raise additional capital to allow us to
continue our planned operations. These factors raise substantial doubt about our
ability to continue as a going concern. The report of our independent registered
public accounting firm for the fiscal year 2004 includes an explanatory
paragraph as to the uncertainty that we will continue as a going concern. While
we have experienced operating losses in the past, due to our acquisition of
EOIR, the operating portion of our business is currently cash flow positive. Our
business plan is to continue to grow our customer base and our revenues and to
control and monitor operating expenses and capital expenditures. We believe that
our business as currently constituted will produce positive cash flow which,
together with our current cash levels, will enable us to meet our existing
financial obligations as they come due during the current fiscal year. However,
we can provide no assurance that the performance of our business will meet our
expectations.


                                       39




<PAGE>

OFF-BALANCE SHEET ARRANGEMENTS

We have no significant off-balance sheet arrangements that have or are
reasonably likely to have a current or future effect on our financial condition,
changes in financial condition, revenues or expenses, results of operations,
liquidity, capital expenditures or capital resources that is material to
stockholders.

EFFECT OF INFLATION AND CHANGES IN PRICES

Management does not believe that inflation and changes in price will have a
material effect on operations.

CRITICAL ACCOUNTING POLICIES

The preparation of Markland's financial statements and related disclosures in
conformity with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, and the disclosure of contingent
assets and liabilities as of the date of the financial statements and the
amounts of revenues and expenses recorded during the reporting periods. We base
our estimates on historical experience, where applicable, and other assumptions
that we believe are reasonable under the circumstances. Actual results may
differ from our estimates under different assumptions or conditions.

The sections below present information about the nature of and rationale for our
critical accounting policies.

PRINCIPLES OF CONSOLIDATION

Our consolidated financial statements include the accounts of Markland and its
wholly-owned subsidiaries, Security Technology, Inc., Ergo Systems, Inc.,
Science and Technology Research Corporation, Inc and E-OIR Technologies, Inc. We
have eliminated all significant inter-company balances and transactions.

CONCENTRATIONS

Statement of Financial Accounting Standards ("SFAS") No. 105, "Disclosure of
Information about Financial Instruments With Off-Balance-Sheet Risk and
Financial Instruments with Concentrations of Credit Risk," requires that we
disclose any significant off-balance-sheet and credit risk concentrations. We
are subject to concentrations of credit risk because the majority of our
revenues and accounts receivable are derived from the US Navy, Computer Science
Corporation and The Department of Homeland Security, none of whom is required to
provide collateral for amounts owed to us. We do not believe that we are subject
to any unusual credit risks, other than the normal level of risk attendant to
operating our business. As of December 31,2004, we had cash balances in banks in
excess of the maximum amount insured by the FDIC. In addition, we derive
substantially all of our contract revenue from contracts with Federal government
agencies. Consequently, substantially all of our accounts receivable are due
from Federal government agencies either directly or through other government
contractors.

IMPAIRMENT OF GOODWILL AND AMORTIZABLE INTANGIBLES

In accordance with SFAS No. 142, "Goodwill and Other Intangible Assets," we
review goodwill for impairment annually, or more frequently if an event occurs
or circumstances change that would more likely than not reduce the fair value of
our business enterprise below its carrying value. The impairment test requires
us to estimate the fair value of our overall business enterprise down to the
reporting unit level. We estimate fair value using both a discounted cash flows
model, as well as an approach using market comparables, both of which are
weighted equally to determine fair value. Under the discounted cash flows
method, we utilize estimated long-term revenue and cash flows forecasts
developed as part of our planning process, as well as assumptions of terminal
value, together with an applicable discount rate, to determine fair value. Under
the market approach, fair value is determined by comparing us to similar
businesses (or guideline companies). Selection of guideline companies and market
ratios require management's judgment. The use of different assumptions within
our discounted cash flows model or within our market approach model when
determining fair value could result in different valuations for goodwill.


                                       40




<PAGE>

ESTIMATED USEFUL LIVES OF AMORTIZABLE INTANGIBLE ASSETS

We amortize our amortizable intangible assets over the shorter of the
contractual/legal life or the estimated economic life. We are amortizing the
intangible assets acquired as of a result of the Ergo and ASI acquisitions overa
three-year life commencing with the date of acquisition. With respect to the
Science & Technology Research, Inc. and EOIR Technologies, Inc. acquisitions,
consistent with independent business valuations, we are amortizing the
intangible assets over ten years and nine years respectively.

IMPAIRMENT OF LONG-LIVED ASSETS

Pursuant to SFAS No. 144, we continually monitor events and changes in
circumstances that could indicate carrying amounts of long-lived assets may not
be recoverable. We recognize an impairment loss when the carrying value of an
asset exceeds expected cash flows. Accordingly, when indicators or impairment of
assets are present, we evaluate the carrying value of such assets in relation to
the operating performance and future undiscounted cash flows of the underlying
business. Our policy is to record an impairment loss when we determine that the
carrying amount of the asset may not be recoverable. No impairment charges were
recorded for the six months ended December 31,2004 and 2003.

REVENUE RECOGNITION

We recognize product revenue when the following criteria are met: (1) we have
persuasive evidence of an arrangement, such as agreements, purchase orders or
written requests; (2) we have completed delivery and no significant obligations
remain, (3) our price to our customer is fixed or determinable, and (4)
collection is probable. We recognize revenues at the time we perform services
related to border security logistic support. With respect to our revenues from
our chemical detectors, we recognize revenue under the units-of-delivery method.
At the time the units are shipped to the warehouse of the United States Navy,
the Company recognizes as revenues the contract price of each unit and
recognizes the applicable cost of each unit shipped. As of June 30, 2004, we had
completed delivery pursuant to all outstanding orders under this contract.
Revenues from time and materials contracts are recognized as costs are incurred.
Revenues from firm fixed price contracts are recognized on the
percentage-of-completion method, either measured based on the proportion of
costs recorded to date on the contract to total estimated contract costs or
measured based on the proportion of labor hours expended to date on the contract
to total estimated contract labor hours, as specified in the contract.
Provisions for estimated losses on all contracts are made in the period in which
such losses become known. Changes in job performance, job conditions, and
estimated profitability, including those arising from contract penalty
provisions, and final contract settlements may result in revision to cost and
income and are recognized in the period in which the revisions are determined.
The Company participates in teaming agreements where they are the primary
contractor and they participate with other organizations to provide services to
the Federal government. The Company has managerial and oversight responsibility
for team members as well as the responsibility for the ultimate acceptability of
performance under the contract. The Company includes as revenues the amounts
that they bill under the teaming arrangements and include as direct costs
amounts that are reimbursable or paid to team members.

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

In December 2004, the FASB issued SFAS No. 123R, "Accounting for Stock-Based
Compensation" ("SFAS No. 123R"). SFAS No. 123R establishes standards for the
accounting for transactions in which an entity exchanges its equity instruments
for goods or services. This Statement focuses primarily on accounting for
transactions in which an entity obtains employee services in share-based payment
transactions. SFAS No. 123R requires that the fair value of such equity
instruments be recognized as an expense in the historical financial statements
as services are performed. Prior to SFAS No. 123R, only certain pro forma
disclosures of fair value were required. The provisions of this Statement are
effective for small business issuers the first interim reporting period that
begins after December 15, 2005. Accordingly, Markland will adopt SFAS No. 123R
commencing with the quarter ending March 31, 2006. If Markland had included the
fair value of employee stock options in these financial statements, the net loss
for the three and six months ended December 31, 2004 and 2003 would have been as
disclosed above. Accordingly, the adoption of SFAS No. 123R is expected to
have a material effect on our financial statements.


                                       41




<PAGE>

ITEM 3. CONTROLS AND PROCEDURES.

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES.

Based on our management's evaluation (with the participation of our principal
executive officer and principal financial officer), as of the end of the period
covered by this report, our principal executive officer and principal financial
officer have concluded that our disclosure controls and procedures (as defined
in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as
amended, (the "Exchange Act")) are effective to ensure that information required
to be disclosed by us in reports that we file or submit under the Exchange Act
is recorded, processed, summarized and reported within the time periods
specified in Securities and Exchange Commission rules and forms. Prior to the
acquisition of EOIR, the limited size of our internal financial and controls
staff did not permit a significant amount of time or expense on monitoring and
oversight of our general administrative and financial functions. In the course
of management's ongoing evaluation of our controls and procedures, management
has concluded that, due to the limited amount of resources available for general
administrative and financial matters prior to the acquisition of EOIR the
Company: (i) had a less than desirable number of people performing a majority of
the financial duties, (ii) lacked the desired internal financial and controls
staff resources for a comprehensive internal audit function, and (iii) and in
some cases had not been able to promptly accumulate and process all of our data
and reports on a timely basis. Management believes that at this time, in light
of existing newly instituted staff and controls, which include additional
administrative personnel acquired with EOIR, and the recent addition of an
outside consultant, the risks associated with a lack of segregation of duties
and limited staff have been largely mitigated. However, management will
periodically reevaluate the situation, and as necessary, will put in place
additional internal staff and controls to prevent a lack of discipline around
policies and procedures in our administrative and financial matters.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING.

There is no change in our internal control over financial reporting during our
second fiscal quarter of 2005 that has materially affected, or is reasonably
likely to materially affect, our internal control over financial reporting. It
should be noted that any system of controls, however well designed and operated,
can provide only reasonable, and not absolute, assurance that the objectives of
the system are met. In addition, the design of any control system is based in
part upon certain assumptions about the likelihood of future events. Because of
these and other inherent limitations of control systems, there can be no
assurance that any design will succeed in achieving its stated goals under all
potential future conditions, regardless of how remote.


PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

         On June 28, 2004, Charles Wainer filed a civil suit against the Company
in Circuit Court for Broward County, Florida, alleging breach of a stock
purchase agreement and breach of an employment agreement stemming from Wainer's
sale of his business to a predecessor of the Company and his subsequent
employment thereat. In the complaint, Wainer alleges Markland owes him $300,000
cash, some unspecified portion of $700,000 in stock, some unspecified portion of
$86,000 cash for lease payments, and approximately $20,000 in back-pay. The
Company believes that these claims are without merit and plans to vigorously
defend the action. On August 11, 2004, the Company answered the complaint and
denied any liability. The trial of this matter began on January 31, 2005; on
that date, the presiding judge referred the parties to mediation.

         On or about September 16, 2004, Joseph R. Moulton, Sr. initiated a
lawsuit in the Circuit Court of Spotsylvania County, Virginia, against the
Company, EOIR, our wholly owned subsidiary, and our Chief Executive Officer and
Director, Robert Tarini. Mr. Moulton was the largest single shareholder of EOIR
prior to its acquisition by the Company, owning approximately 67% of the EOIR
capital stock. Mr. Moulton received approximately $5,863,000 in cash and a
promissory note of EOIR in the approximate principal amount of $6,967,000 for
his shares of EOIR at the closing of the acquisition of EOIR by the Company.


                                       42




<PAGE>

         In his complaint Mr. Moulton asserts, among other things, that the
Company breached its obligations under the Stock Purchase Agreement, dated June
29, 2004, pursuant to which the Company acquired EOIR, by terminating Mr.
Moulton's employment with EOIR and removing him from the EOIR board of
directors.

         Mr. Moulton is seeking damages allegedly suffered by his loss of
employment, extreme emotional distress, and costs incurred to enforce his
contractual rights. In addition, he is seeking certain other equitable relief
including, the appointment of a receiver to oversee the management of EOIR until
these promissory notes issued to former EOIR shareholders at the closing of the
acquisition are paid in full and a declaratory judgment that the Company's
actions constitute an event of default under these promissory notes allowing for
the acceleration of all amounts (approximately $11,000,000) due thereunder. The
Company is a guarantor of these notes.

         The Company believes that the allegations in this lawsuit are entirely
without merit. The Company has filed an answer denying Mr. Moulton's allegations
and opposing vigorously all equitable relief sought. The Company has also filed
a demurrer seeking to dismiss certain claims. The Company is considering
bringing various claims against Mr. Moulton either by counterclaim or in a
separate action.

         In addition, we are subject to legal proceedings, claims, and
litigation arising in the ordinary course of business. While the outcome of
these matters is currently not determinable, we do not expect that the ultimate
costs to resolve these matters will have a material adverse effect on our
consolidated financial position, results of operations, or cash flows.


ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

         During the quarter ending December 31, 2004, various holders of the
Company's Series D Convertible Preferred Stock converted shares of preferred
stock into shares of common stock. The total shares issued under such
conversions was approximately 4,168,729. The issuance of these securities was
exempt from registration under Section 4(2) of the Securities Act of 1933, as
amended, as a sale not involving a public offering.

         On October 5, 2004, we issued 1,205,479 shares of our common stock to
Robert Tarini and Verdi Consulting, 301,370 shares of common stock to Kenneth
Ducey, Jr. and 904,110 shares of common stock to Asset Growth Company in
connection with employment and consulting agreements. The issuance of these
securities was exempt from registration under Section 4(2) of the Securities Act
of 1933, as amended, as a sale not involving a public offering. For more
information concerning this transaction please refer to Note 11 of our Condensed
Consolidated Financial Statements.

         Pursuant to an employment agreement dated October 27, 2003, the company
issued 10,713 shares of common stock to one employee on October 4, 2004. The
issuance of these securities was exempt from registration under Section 4(2) of
the Securities Act of 1933, as amended, as a sale not involving a public
offering. For more information concerning this transaction please refer to Note
11 of our Condensed Consolidated Financial Statements.

         On October 5, 2004, the Company issued 40,172 shares of common stock to
ECON Investor Relations, Inc. pursuant to a consulting agreement under which
ECON Investor Relations, Inc. performs services for the Company relating to
investor relations. Also on October 5, 2004, the Company issued 75,000 shares of
common stock to Mark Groussman and Jason Lyons pursuant to services rendered in
connection to the Company's September 21, 2004, private placement. The issuance
of these securities was exempt from registration under Section 4(2) of the
Securities Act of 1933, as amended, as a sale not involving a public offering.

         On November 9, 2004, we entered into a Purchase Agreement with
Harborview Master Fund, LP and Southridge Partners, LP, pursuant to which we
sold warrants to purchase 2,193,750 shares of our common stock and secured
convertible promissory notes in the principal amount of $1,755,000, for the
aggregate consideration of $1,350,000. We received net proceeds of $1,174,500
from this private placement. We also issued to Greenfield Capital Partners, LLC,
David Stefansky and Richard Rosenblum warrants to purchase an aggregate 337,500
shares of our common stock at an exercise price of $1.50 as compensation in
connection with this private placement. The offer and sale of these securities
was made in reliance on Section 4(2) of the Securities Act of 1933, as amended.
For more information concerning this transaction please refer to Notes 6 and 9
of our Condensed Consolidated Financial Statements.


                                       43




<PAGE>

         On December 7, 2004, the Company issued 91,667 shares of common stock
to Summerstrand Investments, Ltd., and 61,111 shares of common stock to Schoeppl
& Burke, P.A., in connection with a lawsuit in which Summerstand Investments,
Ltd., was a plaintiff and the Company was a defendant. The offer and sale of
these securities was made in reliance on Section 4(2) of Securities Act of 1933,
as amended. For more information concerning this transaction please refer to
Note 14 of our Condensed Consolidated Financial Statements.

         On December 7, 2004, the Company issued warrants to purchase 4,000,000
shares of common stock at an exercise price of $0.60 per share to Trilogy
Capital Partners, Inc., pursuant to a consulting agreement under which Trilogy
Capital Partners, Inc., provides services to us related to public relations and
investor relations. Also on December 7, 2004, the Company issued warrants to
purchase 400,000 shares of common stock to an unaffiliated consultant as
compensation in connection with our agreement with Trilogy Capital Partners,
Inc. The issuance of these securities was exempt from registration under Section
4(2) of the Securities Act of 1933, as amended, as a sale not involving a public
offering. For more information concerning this transaction please refer to Note
9 of our Condensed Consolidated Financial Statements.

Subsequent stock issuances
--------------------------

         On January 3, 2005, we issued 2,867,458 shares of our common stock to
Robert Tarini, 3,548,322 to Verdi Consulting, 716,864 shares of common stock to
Kenneth Ducey, Jr., 2,150,593 shares of common stock to Asset Growth Company,
3,000,000 to Gino Pereira and 2,000,000 to Joseph Mackin in connection with
employment and consulting agreements. The issuance of these securities was
exempt from registration under Section 4(2) of the Securities Act of 1933, as
amended, as a sale not involving a public offering. For more information
concerning this transaction please refer to Note 15 of our Condensed
Consolidated Financial Statements.

         On January 5, 2005, the Company issued warrants to purchase 1,088,160
shares of common stock to James LLC in connection with a lock-up agreement
restricting the ability of James LLC to convert shares of our Series D
Cumulative Preferred Stock and to sell shares resulting from such a conversion.
The issuance of these securities was exempt from registration under Section 4(2)
of the Securities Act of 1933, as amended, as a sale not involving a public
offering. For more information concerning this transaction please refer to Note
15 of our Condensed Consolidated Financial Statements.

         On February 7, 2005, we issued warrants to purchase an aggregate of
2,943,750 shares of our common stock to Southridge Partners, LP, Harborview
Master Fund LP, Richard Rosenblum and David Stefansky. The issuance of these
securities was exempt from registration under Section 4(2) of the Securities Act
of 1933, as amended, as a sale not involving a public offering. For more
information concerning this transaction please refer to Note 15 of our Condensed
Consolidated Financial Statements.

         On February 14, 2005, we issued 10,168,764 shares of Common Stock to
Technest Holdings, Inc., who subsequently transferred those shares to Jason
Geng. the issuance of these securities was exempt from registration under
Section 4(2) of the Securities Act of 1933, as amended, as a sale not involving
a public offering. For more information concerning this transaction please refer
to Note 15 of our Condensed Financial Statements.

ITEM  3.  DEFAULTS UPON SENIOR SECURITIES.
-----------------------------------------

NONE

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
------------------------------------------------------------

No matters were submitted to our securities holders during the fiscal quarter
ended December 31, 2004.

ITEM 5. OTHER ISSUES
--------------------

NONE


                                       44


<PAGE>

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.

(a) EXHIBITS
<TABLE>
<S>     <C>
                                                                                   INCORPORATED BY REFERENCE
                                                            FILED WITH      -------------------------------------------
                                                             THIS FORM                                         EXHIBIT
EXHIBIT NO.                  DESCRIPTION                      10-QSB          FORM         FILING DATE           NO.
-----------  --------------------------------------------   ----------      --------    ----------------      ---------

    2.1      Securities Purchase Agreement by and among
             Technest Holdings, Inc., and Southridge
             Partners, LP, Southshore Capital Fund
             Limited, ipPartners, Inc., Verdi Consulting,
             Inc., DKR Soundshore Oasis Holding Fund,
             Ltd., DKR Soundshore Strategic Holding
             Fund, Ltd and Deer Creek Fund, LP, dated
             February 14, 2005                                               8-K        February 14, 2005       2.1

    2.2      Securities Purchase Agreement between
             Markland Technologies, Inc., and Technest
             Holdings, Inc., and dated February 14, 2005                     8-K        February 14, 2005       2.2

    2.3      Agreement and Plan of Merger by and between
             Technest Holdings, Inc., MTECH Acquisition,
             Inc., Genex Technologies, Inc. and Jason
             Geng, dated February 14, 2005                                   8-K        February 14, 2005       2.3

    3.1      Articles of Incorporation of Quest Net
             Corp., filed with the Florida Secretary of
             State on December 28, 1998                                      8-K         March 20, 2000         1.3

    3.2      Articles of Merger filed with the Florida
             Secretary of State on March 15, 2000                            8-K         March 20, 2000         1.2

    3.3      Articles of Amendment to the Articles of
             Incorporation of Quest Net Corp., filed
             with the Florida Secretary of State on
             April 4, 2001                                                   8-K         April 10, 2001         3.1

    3.4      Articles of Amendment to the Articles of
             Incorporation of Quest Net Corp., filed
             with the Florida Secretary of State on June
             21, 2001                                                        8-K         April 10, 2001         3.3

    3.5      Articles of Amendment to the Articles of
             Incorporation of Markland Technologies,
             Inc. filed with the Florida Secretary of
             State on December 21, 2001                                     SB-2          May 11, 2004          3.5

    3.6      Articles of Amendment to the Articles of
             Incorporation of Markland Technologies,
             Inc. filed with the Florida Secretary of
             State on September 16, 2003                                   10-KSB       October 14, 2003        3.6

    3.7      Certificate of Designations of Rights and
             Preferences of the Series A Non-Voting
             Convertible Preferred Stock                                   10-KSB       October 14, 2003        3.7

    3.8      Certificate of Designations of Rights and
             Preferences of the Series C Cumulative
             Convertible Preferred Stock                                     8-K       December 20, 2002        3.5

    3.9      Certificate of Designations of Rights and
             Preferences of the Series D Cumulative
             Convertible Preferred Stock                                   10-KSB       October 14, 2003        3.5

   3.10      Amended and Restated By-Laws                                    8-K         March 20, 2000         1.4

    4.1      Form of common stock certificate of
             Markland Technologies, Inc.                                   10-QSB      February 14, 2003        4.1

    4.2      Registration Rights Agreement between
             Markland Technologies, Inc., Montana View
             Corporation, Elite Properties, Ltd.,
             Sparrow Ventures, Inc., dated April 2, 2004                    SB-2          May 11, 2004          4.2

    4.3      Form of Common Stock Purchase Warrant dated
             April 2, 2004                                                  SB-2          May 11, 2004          4.3


                                                           45


<PAGE>

                                                                                   INCORPORATED BY REFERENCE
                                                            FILED WITH      -------------------------------------------
                                                             THIS FORM                                         EXHIBIT
EXHIBIT NO.                  DESCRIPTION                      10-QSB          FORM         FILING DATE           NO.
-----------  --------------------------------------------   ----------      --------    ----------------      ---------

    4.4      Form of Common Stock Purchase Warrant dated
             April 16, 2004                                                 SB-2          May 11, 2004          4.4

    4.5      Form of Common Stock Purchase Warrant dated
             May 3, 2004                                                    SB-2          May 11, 2004          4.5

    4.6      Registration Rights Agreement, dated March
             19, 2003, by and between ASI Technology
             Corporation and Markland Technologies, Inc.                   10-KSB       October 14, 2003       10.10

    4.7      Registration Rights Agreement by and
             between Markland Technologies, Inc. and
             Brittany Capital Management limited, dated
             September 10, 2003.                                           10-KSB       October 14, 2003       10.17

    4.8      Consulting Agreement by and between
             Markland Technologies, Inc. and George
             Yang, dated September 30, 2003.                                 8K        November 12, 2003       10.3

    4.9      Consulting Agreement by and between
             Markland Technologies, Inc. and
             Commonwealth Acquisitions, Ltd., dated
             March 24, 2003.                                                SB-2          May 11, 2004          4.9

   4.10      Consulting Agreement by and between ECON
             Investor Relations, Inc., dated January 18,
             2003.                                                          SB-2          May 11, 2004         4.10

   4.11      Consulting Agreement by and between
             Markland Technologies, Inc. and Marketshare
             Recovery, Inc., dated October 29, 2003                         SB-2          May 11, 2004         4.11

   4.12      Consulting Agreement by and between
             Markland Technologies, Inc. and Emerging
             Concepts, Inc., dated July 7, 2003                            10-QSB      February 23, 2004       10.4

   4.13      Research Agreement by and between Markland
             Technologies, Inc. and The Research Works,
             Inc., dated October 29, 2003                                   SB-2          May 11, 2004         4.13

   4.14      Employment Agreement by and between
             Markland Technologies, Inc. and Jo-Ann
             Nichols, dated October 27, 2003.                               SB-2          May 11, 2004         4.14

   4.15      Registration Rights Agreement by and
             between Markland Technologies, Inc. and the
             investors named therein, dated September
             21, 2004                                                        8-K       September 23, 2004      99.3

   4.16      Form of Common Stock Purchase Warrant
             issued by Markland Technologies, Inc. on
             September 21, 2004                                              8-K       September 23, 2004      99.5

   4.17      Lock-up Agreement by and among Markland
             Technologies, Inc., Robert Tarini, and
             Kenneth Ducey, Jr.                                              8-K       September 23, 2004      99.7

   4.18      Lock-up Agreement by and between Markland
             Technologies, Inc. and James, LLC.                              8-K       September 23, 2004      99.6

   4.19      Waiver Agreement by and among Markland
             Technologies, Inc. and the parties named
             therein, dated September 21, 2004                               8-K       September 23, 2004      99.8

   4.20      Amendment to Warrant No. CS-84                                  8-K       December 30, 2004       99.1

   4.21      Amendment to Warrant No. CS-85                                  8-K       December 30, 2004       99.2

   4.22      Form of New DKR Warrants                                        8-K       December 30, 2004       99.3

   4.23      Amendment to Warrant No. CS-83                                  8-K       December 30, 2004       99.4

   4.24      Amendment to Warrant No. CS-89                                  8-K       December 30, 2004       99.5


                                                           46


<PAGE>

                                                                                   INCORPORATED BY REFERENCE
                                                            FILED WITH      -------------------------------------------
                                                             THIS FORM                                         EXHIBIT
EXHIBIT NO.                  DESCRIPTION                      10-QSB          FORM         FILING DATE           NO.
-----------  --------------------------------------------   ----------      --------    ----------------      ---------

   4.25      Amendment to Stefansky Warrant                                  8-K        January 7, 2005        99.1

   4.26      Amendment to Rosenblum Warrant                                  8-K        January 7, 2005        99.2

   4.27      Amendment to Harborview Warrant                                 8-K        January 7, 2005        99.3

   4.28      Preferred Stock Restriction Agreement                           8-K        January 11, 2005       99.1

   4.29      Form of Warrant                                                 8-K        January 11, 2005       99.3

   4.30      Form of Preferred Stock Restriction
             Agreement Amendment                                             8-K        January 12, 2005       99.1

   4.31      Registration Rights Agreement between
             Markland Technologies, Inc., and Southridge
             Partners, LP, Southshore Capital Fund
             Limited, ipPartners, Inc., Verdi Consulting
             Inc., DKR Soundshore Oasis Holding Fund,
             Ltd., DKR Soundshore Strategic Holding Fund,
             Ltd. and Deer Creek Fund, LP for Markland
             Common Stock, dated February 14, 2005                           8-K        February 14, 2005       4.1

   4.32      Registration Rights Agreement between
             Technest Holdings, Inc., and Markland
             Technologies, Inc., dated February 14, 2005                     8-K        February 14,2005        4.2

   4.33      Registration Rights Agreement between
             Technest Holdings, Inc., and Southridge
             Partners, LP, Southshore Capital Fund
             Limited, ipPartners, Inc., Verdi Consulting
             Inc., DKR Soundshore Oasis Holding Fund,
             Ltd., DKR Soundshore Strategic Holding Fund,
             Ltd. and Deer Creek Fund, LP for Technest
             Series C Preferred Stock and Warrants for
             Technest common stock, dated February 14,
             2005                                                            8-K        February 14, 2005       4.3

   4.34      Registration Rights Agreement between
             Technest Holdings, Inc. and Jason Geng for
             registration of Earnout Shares, dated
             February 14, 2005                                               8-K        February 14, 2005       4.4

   4.35      Registration Rights Agreement between
             Markland Technologies, Inc., and Jason
             Geng, dated February 14, 2005                                   8-K        February 14, 2005       4.5

   4.36      Form of Technest Common Stock Purchase
             Warrant                                                         8-K        February 14, 2005       4.6

   4.37      Technest Series B Convertible Preferred
             Stock Certificate of Designations filed with
             the Secretary of State of Nevada on
             February 14, 2005                                               8-K        February 14, 2005       4.7

   4.38      Technest Series C Convertible Preferred
             Stock Certificate of Designations filed with
             the Secretary of State of Nevada on
             February 14, 2005                                               8-K        February 14, 2005       4.8

   4.39      Promissory Note issued to Jason Geng by
             Genex Technologies, Inc., dated February 14,
             2005                                                            8-K        February 14, 2005       4.9

   10.1      Securities Purchase Agreement, between
             Markland Technologies, Inc., Montana View
             Corporation, Elite Properties, Ltd., and
             Sparrow Ventures, Inc., dated April 2, 2004                    SB-2          May 11, 2004         10.1

   10.2      Securities Purchase Agreement by and among
             Markland Technologies, Inc. and the
             Investors named therein, dated April 16,
             2004.                                                          SB-2          May 11, 2004         10.2


                                                           47


<PAGE>

                                                                                   INCORPORATED BY REFERENCE
                                                            FILED WITH      -------------------------------------------
                                                             THIS FORM                                         EXHIBIT
EXHIBIT NO.                  DESCRIPTION                      10-QSB          FORM         FILING DATE           NO.
-----------  --------------------------------------------   ----------      --------    ----------------      ---------

   10.3      Securities Purchase Agreement by and
             between Markland Technologies, Inc. and the
             Investors named therein, dated May 3, 2004.                    SB-2          May 11, 2004         10.3

   10.4      Agreement and Plan of Merger by and among
             Markland Technologies, Inc. and STR
             Acquisition Corp., Security Technology,
             Inc., Science and Technology Research,
             Inc., and George Yang, dated September 30,
             2003.                                                           8K        November 12, 2003       10.1

   10.5      Promissory Note made by Markland
             Technologies, Inc., in favor of George
             Yang, dated September 30, 2003.                                 8K        November 12, 2003       10.4

   10.6      Security Agreement by and between Markland
             Technologies, Inc. and George Yang, dated
             September 30, 2003.                                            SB-2          May 11, 2004         10.6

   10.7      Guaranty by Markland Technologies, Inc. in
             favor of George Yang, dated September 30,
             2003.                                                          SB-2          May 11, 2004         10.7

   10.8      Amendment and Payment Extension Agreement
             by and between Markland Technologies, Inc.
             and George Yang, dated March 17, 2004.                         SB-2          May 11, 2004         10.8

   10.9      Loan Agreement by and between Security
             Technology, Inc. and Bay View Capital LLC,
             dated September 30, 2003.                                       8K        November 12, 2003       10.2

   10.10     Promissory Note by and among Markland
             Technologies, Inc., Security Technology,
             Inc., and Bay View Capital LLC, dated
             September 30, 2003.                                             8K        November 12, 2003       10.5

   10.11     Security Agreement by and between Security
             Technology, Inc. and Bay View Capital LLC,
             dated September 30, 2003.                                      SB-2          May 11, 2004         10.11

   10.12     Security Agreement by and between Markland
             Technologies, Inc. and Bay View Capital LLC.                   SB-2          May 11, 2004         10.12

   10.13     Sublicense Agreement by and between
             Markland Technologies, Inc. and ASI
             Technology Corporation, dated March 19,
             2004.                                                          SB-2          May 11, 2004         10.13

   10.14     ASI Technology Corporation SBIR Phase II
             Proposal, dated October 8, 2001.                              SB-2/1A       June 16, 2004         10.14

   10.15     ASI Technology Corporation Contract
             with Air Force Office of Scientific Research,
             dated August 1, 2002.                                         SB-2/1A       June 16, 2004         10.15

   10.16     ASI Technology Corporation Contract with
             Naval Surface Warfare Center, dated January
             31, 2003.                                                     SB-2/1A       June 16, 2004         10.16

   10.17     Stock Purchase Agreement by and among Ocean
             Data Equipment Corporation, Ergo Systems,
             Markland Technologies, and Security
             Technology, Inc., dated December 9, 2002.                       8-K        January 28, 2003       10.1

   10.18     Exchange Agreement, dated December 9, 2002,
             by and among Markland Technologies, Inc.,
             Market LLC, and James LLC.                                      8-K       December 20, 2002       10.4

   10.19     Exchange Agreement, dated December 9, 2002,
             by and among Eurotech, Ltd., Crypto.com
             Inc., Markland Technologies, Inc., Security
             Technology, Inc. ipPartners, Inc., Market
             LLC,  and James LLC.                                            8-K       December 20, 2002       10.5


                                                           48


<PAGE>

                                                                                   INCORPORATED BY REFERENCE
                                                            FILED WITH      -------------------------------------------
                                                             THIS FORM                                         EXHIBIT
EXHIBIT NO.                  DESCRIPTION                      10-QSB          FORM         FILING DATE           NO.
-----------  --------------------------------------------   ----------      --------    ----------------      ---------

   10.20     First Amendment to Exchange Agreement,
             dated December 9, 2002, by and among
             Eurotech, Ltd., Crypto.com Inc., Markland
             Technologies, Inc., Security Technology,
             Inc. ipPartners, Inc., Market LLC,  and
             James LLC.                                                    10-QSB      February 14, 2003       10.6

   10.21     Restated and Amended Convertible Revolving
             Credit Note Agreement, dated December 10,
             2002, by and between Markland Technologies,
             Inc. and Market LLC.                                          10-QSB      February 14, 2003       10.2

   10.22     Letter from Sherb & Co., LLP to the
             Commission, dated March 12, 2003,
             concerning change in certifying accountant.                     8-K         March 17, 2003        16.1

   10.23     Technology Purchase Agreement between
             Markland Technologies, Inc. and ASI
             Technology Corporation, dated March 19,
             2003.                                                           8-K         April 4, 2003         10.1

   10.24     Exchange Agreement, dated March 27, 2003,
             by and between Eurotech, Ltd. and Markland
             Technologies, Inc.                                              8-K         April 4, 2003         10.2

   10.25     Registration Rights Agreement, dated March
             27, 2003, by and between Eurotech, Ltd. and
             Markland Technologies, Inc.                                   10-KSB       October 14, 2003       10.12

   10.26     Amended and Restated Exchange Agreement,
             dated July 24, 2003, by and between
             Markland Technologies, Inc. and Syqwest,
             Inc.                                                            8-K         July 30, 2003         10.1

   10.27     Preferred Securities Purchase Agreement by
             and between Markland Technologies, Inc. and
             James LLC, dated February 2, 2003, relating
             to the issuance of 170 shares of Series C
             5% Convertible Preferred Stock.                               10-KSB       October 14, 2003       10.14

   10.28     Preferred Securities Purchase Agreement by
             and between Markland Technologies, Inc.,
             and James LLC, dated April 1, 2003,
             relating to the issuance of Series D
             Convertible Preferred Stock.                                  10-KSB       October 14, 2003       10.15

   10.29     Private Equity Credit Agreement by and
             between Markland Technologies, Inc. and
             Brittany Capital Management Limited, dated
             September 10, 2003.                                           10-KSB       October 14, 2003       10.16

   10.30     Employment and consulting agreements, dated
             December 5, 2002, for Delmar Kintner,
             Kenneth Ducey, Robert Tarini, and Verdi
             Consulting.                                                   10-KSB       October 14, 2003       10.18

   10.31     Nonexclusive License Agreement by and
             Science & Technology Research , Inc. and
             the Secretary of the Navy, dated 11/4/03.                      SB-2          May 11, 2004         10.31

   10.32     International Distribution Agreement
             between Markland Technologies, Inc. and
             Tradeways.                                                     SB-2          May 11, 2004         10.32

   10.33     Science & Technology Research contract
             Naval Surface Warfare Center, dated January
             31, 2003.                                                      SB-2          May 11, 2004         10.33


                                                           49


<PAGE>

                                                                                   INCORPORATED BY REFERENCE
                                                            FILED WITH      -------------------------------------------
                                                             THIS FORM                                         EXHIBIT
EXHIBIT NO.                  DESCRIPTION                      10-QSB          FORM         FILING DATE           NO.
-----------  --------------------------------------------   ----------      --------    ----------------      ---------

   10.34     Subcontract Agreement by and between ERGO
             Systems, Inc. and Computer Sciences
             Corporation ,dated December 8, 2003.                           SB-2          May 11, 2004         10.34

   10.35     Lease for Property in Fredericksburg,
             Virginia.                                                     SB-2/1A       June 16, 2004         10.35

   10.36     Co-Operative Research and Development
             Agreement between Markland Technologies,
             Inc. and the U.S. Air Force.                                  SB-2/1A       June 16, 2004         10.35

   10.37     Employment Agreement by and between
             Markland Technologies, Inc. and Robert
             Tarini, dated May 12, 2004 .                                  10-QSB         May 24, 2004         10.32

   10.38     Employment Agreement by and between
             Markland Technologies, Inc. and Kenneth
             Ducey, Jr., dated May 12, 2004.                               10-QSB         May 24, 2004         10.33

   10.39     Strategic Operations Contractor Agreement
             by and between Markland Technologies, Inc.
             and Asset Growth Company, dated May 12,
             2004.                                                         10-QSB         May 24, 2004         10.34

   10.40     Consulting Agreement by and between
             Markland Technologies, Inc. and Chad A.
             Verdi, dated May 12, 2004.                                    10-QSB         May 24, 2004         10.35

   10.41     Amendment to Employment Agreement between
             Markland Technologies Inc. and Robert
             Tarini dated June 16, 2004.                                   SB-2/1A       June 16, 2004         10.41
             Amendment to the Employment

   10.42     Agreement between Markland
             Technologies Inc. and Kenneth P. Ducey,
             dated June 16, 2004.                                          SB-2/1A       June 16, 2004         10.42

   10.43     Amendment to the Consulting Agreement
             between Markland Technologies Inc. and
             Verdi Consulting, dated June 16, 2004.                        SB-2/1A       June 16, 2004         10.43

   10.44     Amendment to the Strategic Operations
             Contractor Agreement by and between
             Markland Technologies, Inc. and Asset
             Growth Company, dated June 16, 2004.                          SB-2/1A       June 16, 2004         10.44

   10.45     Purchase Agreement between Markland
             Technologies, Inc. and the investors named
             therein, dated September 21, 2004.                              8-K       September 23, 2004      99.1

   10.46     Security Agreement between Markland
             Technologies, Inc. and the investors named
             therein, dated September 21, 2004.                              8-K       September 23, 2004      99.2

   10.47     Form of Secured Convertible Promissory Note
             issued by Markland Technologies, Inc., on
             September 21, 2004.                                             8-K       September 23, 2004      99.4


                                                           50


<PAGE>

                                                                                   INCORPORATED BY REFERENCE
                                                            FILED WITH      -------------------------------------------
                                                             THIS FORM                                         EXHIBIT
EXHIBIT NO.                  DESCRIPTION                      10-QSB          FORM         FILING DATE           NO.
-----------  --------------------------------------------   ----------      --------    ----------------      ---------

   10.48     Night Vision Electronic Sensors Directorate
             (NVESD) Omnibus Contract between E-OIR
             Measurement Inc., a subsidiary of EOIR and
             United States Army Night Vision and
             Electronic Sensors Directorate.                               10-KSB       October 13, 2004       10.48

   10.49     Securities Purchase Agreement between
             Markland Technologies, Inc., Harborview
             Master Fund L.P. and Southridge Partners LP
             dated November 9, 2004.                                        SB-2       November 10, 2004       10.50

   10.50     Form of Convertible Note issued to
             Harborview Master Fund L.P. and Southridge
             Partners LP.                                                   SB-2       November 10, 2004       10.51

   10.51     Form of Warrant issued to Harborview Master
             Fund L.P. and Southridge Partners LP.                          SB-2       November 10, 2004       10.52

   10.52     Subordination Agreement between DKR
             Soundshore Oasis Holding Fund, LLC DKR
             Soundshore Strategic Holding Fund, LLC,
             Harborview Master Fund L.P., Southridge
             Partners LP, and Markland Technologies,
             Inc., dated November 9, 2004.                                  SB-2       November 10, 2004       10.53

   10.53     Conditional Waiver and Consent between DKR
             Soundshore Oasis Holding Fund, LLC DKR
             Soundshore Strategic Holding Fund, LLC,
             Harborview Master Fund L.P., Southridge
             Partners LP, and Markland Technologies,
             Inc., dated November 9, 2004.                                  SB-2       November 10, 2004       10.54

   10.54     Stock Purchase Agreement by and between
             Markland and EOIR, dated June 30,
             2004                                                            8-K         June 30, 2004          2.1

   10.55     Forms of Promissory Note.                                       8-K         June 30, 2004          2.2

   10.56     Security Agreement by and between EOIR and
             sellers of EOIR stock, dated June 30, 2004.                     8-K         June 30, 2004          2.3

   10.57     2004 Stock Option Plan, adopted June 30,
             2004.                                                           8-K         June 30, 2004          2.4

   10.58     Preferred Securities Purchase Agreement.                        8-K         June 30, 2004          2.5

   10.59     Pledge and Security Agreement.                                  8-K         June 30, 2004          2.6

   10.60     Forms of Stock Option.                                          8-K         June 30, 2004          2.7

   10.61     Agreement and General Release, dated
             November 1, 2004, between Markland
             Technologies, Inc. and Gregory A. Williams.         X

   10.62     Engagement Letter with Trilogy Capital
             Partners, Inc.                                                  8-K        December 9, 2004       99.1


                                                           51


<PAGE>

                                                                                   INCORPORATED BY REFERENCE
                                                            FILED WITH      -------------------------------------------
                                                             THIS FORM                                         EXHIBIT
EXHIBIT NO.                  DESCRIPTION                      10-QSB          FORM         FILING DATE           NO.
-----------  --------------------------------------------   ----------      --------    ----------------      ---------

   10.63     Form of Warrant issued to Trilogy Capital
             Partners, Inc., and the unaffiliated
             consultant                                                      8-K        December 9, 2004       99.2

   10.64     Waiver by and between the Company, DKR
             Soundshore Oasis Holding Fund Ltd., DKR
             Soundshore Strategic Holding Fund Ltd.,
             Harborview Master Fund L.P. and Southridge
             Partners LP.                                                    8-K       December 13, 2004       99.1

   10.65     Letter Agreement by and between the
             Company, DKR Soundshore Oasis Holding Fund
             Ltd., and DKR Soundshore Strategic Holding
             Fund Ltd.                                                       8-K       December 13, 2004       99.2

   10.66     Employment Agreement with Robert Tarini                         8-K        January 7, 2005        99.4

   10.67     Employment Agreement with Ken Ducey                             8-K        January 7, 2005        99.5

   10.68     Employment Agreement with Joseph Mackin                         8-K        January 7, 2005        99.6

   10.69     Employment Agreement with Gino Pereira                          8-K        January 7, 2005        99.7

   10.70     Strategic Operations Contractor Agreement
             with Asset Growth Company                                       8-K        January 7, 2005        99.8

   10.71     Consultant Agreement with Verdi Consulting                      8-K        January 7, 2005        99.9

   10.72     Finder Agreement between Technest Holdings,
             Inc. and Greenfield Capital, dated February
             14, 2005                                                        8-K        February 14, 2005      10.1

   10.73     Escrow Agreement between Markland
             Technologies, Inc., Technest Holdings, Inc.,
             Genex Technologies, Inc., Jason Geng, and
             Wilmington Trust Company, dated February __,
             2005                                                            8-K        February 14, 2005      10.2

   10.74     Lock-Up Agreement of Jason Geng, dated
             February 14, 2005                                               8-K        February 14, 2005      10.3

   10.75     Employment Agreement between Genex
             Technologies, Inc. and Jason Geng dated
             February 14, 2005                                               8-K        February 14, 2005      10.4

   10.76     Lock-up Agreement between Technest Holdings,
             Inc., Garth LLC and Southshore Capital Fund
             Ltd., dated February 14, 2005                                   8-K        February 14, 2005      10.5

   10.77     Form of Option to be granted under the 2004
             Markland Stock Incentive Plan                                   8-K        February 14, 2005      10.7

   10.78     Agreement between Genex Technologies, Inc.
             and Ocean Tomo                                                  8-K        February 14, 2005      10.8

   10.79     February 14, 2005 Markland Press Release                        8-K        February 14, 2005      10.9

             Certification by CEO of Periodic Report

   31.1      Pursuant to Rule 13a-14(a) or Rule 15d-14(a)        X
             Certification by CFO of Periodic Report

   31.2      Pursuant to Rule 13a-14(a) or Rule 15d-14(a)        X
             Certification by CEO and CFO of Periodic

   32.1      Report Pursuant to 18 U.S.C. Section 1350           X

   99.1      Articles of Merger merging MTECH
             Acquisition, Inc. with and into Genex
             Technologies, Inc., filed with the Secretary
             of the State of Maryland on February 14, 2005       X

   99.2      Articles of Merger merging MTECH
             Acquisitions with and into Genex
             Technologies, Inc., filed with the Secretary
             of the State of Delaware on February 14, 2005       X
</TABLE>

                                                           52


<PAGE>

                                   SIGNATURES

         In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.




                                                   MARKLAND TECHNOLOGIES, INC.


Date: February 18, 2005                      By:   /s/ Robert Tarini
                                                   -----------------------------
                                                   Robert Tarini
                                                   Chairman, Director, and
                                                   Chief Executive Officer


                                       53


<PAGE>
<TABLE>
<S>     <C>

                                                                                   INCORPORATED BY REFERENCE
                                                            FILED WITH      -------------------------------------------
                                                             THIS FORM                                         EXHIBIT
EXHIBIT NO.                  DESCRIPTION                      10-QSB          FORM         FILING DATE           NO.
-----------  --------------------------------------------   ----------      --------    ----------------      ---------

    2.1      Securities Purchase Agreement by and among
             Technest Holdings, Inc., and Southridge
             Partners, LP, Southshore Capital Fund
             Limited, ipPartners, Inc., Verdi Consulting,
             Inc., DKR Soundshore Oasis Holding Fund,
             Ltd., DKR Soundshore Strategic Holding
             Fund, Ltd and Deer Creek Fund, LP, dated
             February 14, 2005                                               8-K        February 14, 2005       2.1

    2.2      Securities Purchase Agreement between
             Markland Technologies, Inc., and Technest
             Holdings, Inc., and dated February 14, 2005                     8-K        February 14, 2005       2.2

    2.3      Agreement and Plan of Merger by and between
             Technest Holdings, Inc., MTECH Acquisition,
             Inc., Genex Technologies, Inc. and Jason
             Geng, dated February 14, 2005                                   8-K        February 14, 2005       2.3

    3.1      Articles of Incorporation of Quest Net
             Corp., filed with the Florida Secretary of
             State on December 28, 1998                                      8-K         March 20, 2000         1.3

    3.2      Articles of Merger filed with the Florida
             Secretary of State on March 15, 2000                            8-K         March 20, 2000         1.2

    3.3      Articles of Amendment to the Articles of
             Incorporation of Quest Net Corp., filed
             with the Florida Secretary of State on
             April 4, 2001                                                   8-K         April 10, 2001         3.1

    3.4      Articles of Amendment to the Articles of
             Incorporation of Quest Net Corp., filed
             with the Florida Secretary of State on June
             21, 2001                                                        8-K         April 10, 2001         3.3

    3.5      Articles of Amendment to the Articles of
             Incorporation of Markland Technologies,
             Inc. filed with the Florida Secretary of
             State on December 21, 2001                                     SB-2          May 11, 2004          3.5

    3.6      Articles of Amendment to the Articles of
             Incorporation of Markland Technologies,
             Inc. filed with the Florida Secretary of
             State on September 16, 2003                                   10-KSB       October 14, 2003        3.6

    3.7      Certificate of Designations of Rights and
             Preferences of the Series A Non-Voting
             Convertible Preferred Stock                                   10-KSB       October 14, 2003        3.7

    3.8      Certificate of Designations of Rights and
             Preferences of the Series C Cumulative
             Convertible Preferred Stock                                     8-K       December 20, 2002        3.5

    3.9      Certificate of Designations of Rights and
             Preferences of the Series D Cumulative
             Convertible Preferred Stock                                   10-KSB       October 14, 2003        3.5

   3.10      Amended and Restated By-Laws                                    8-K         March 20, 2000         1.4

    4.1      Form of common stock certificate of
             Markland Technologies, Inc.                                   10-QSB      February 14, 2003        4.1

    4.2      Registration Rights Agreement between
             Markland Technologies, Inc., Montana View
             Corporation, Elite Properties, Ltd.,
             Sparrow Ventures, Inc., dated April 2, 2004                    SB-2          May 11, 2004          4.2

    4.3      Form of Common Stock Purchase Warrant dated
             April 2, 2004                                                  SB-2          May 11, 2004          4.3

    4.4      Form of Common Stock Purchase Warrant dated
             April 16, 2004                                                 SB-2          May 11, 2004          4.4


                                                           54


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                                                                                   INCORPORATED BY REFERENCE
                                                            FILED WITH      -------------------------------------------
                                                             THIS FORM                                         EXHIBIT
EXHIBIT NO.                  DESCRIPTION                      10-QSB          FORM         FILING DATE           NO.
-----------  --------------------------------------------   ----------      --------    ----------------      ---------

    4.5      Form of Common Stock Purchase Warrant dated
             May 3, 2004                                                    SB-2          May 11, 2004          4.5

    4.6      Registration Rights Agreement, dated March
             19, 2003, by and between ASI Technology
             Corporation and Markland Technologies, Inc.                   10-KSB       October 14, 2003       10.10

    4.7      Registration Rights Agreement by and
             between Markland Technologies, Inc. and
             Brittany Capital Management limited, dated
             September 10, 2003.                                           10-KSB       October 14, 2003       10.17

    4.8      Consulting Agreement by and between
             Markland Technologies, Inc. and George
             Yang, dated September 30, 2003.                                 8K        November 12, 2003       10.3

    4.9      Consulting Agreement by and between
             Markland Technologies, Inc. and
             Commonwealth Acquisitions, Ltd., dated
             March 24, 2003.                                                SB-2          May 11, 2004          4.9

   4.10      Consulting Agreement by and between ECON
             Investor Relations, Inc., dated January 18,
             2003.                                                          SB-2          May 11, 2004         4.10

   4.11      Consulting Agreement by and between
             Markland Technologies, Inc. and Marketshare
             Recovery, Inc., dated October 29, 2003                         SB-2          May 11, 2004         4.11

   4.12      Consulting Agreement by and between
             Markland Technologies, Inc. and Emerging
             Concepts, Inc., dated July 7, 2003                            10-QSB      February 23, 2004       10.4

   4.13      Research Agreement by and between Markland
             Technologies, Inc. and The Research Works,
             Inc., dated October 29, 2003                                   SB-2          May 11, 2004         4.13

   4.14      Employment Agreement by and between
             Markland Technologies, Inc. and Jo-Ann
             Nichols, dated October 27, 2003.                               SB-2          May 11, 2004         4.14

   4.15      Registration Rights Agreement by and
             between Markland Technologies, Inc. and the
             investors named therein, dated September
             21, 2004                                                        8-K       September 23, 2004      99.3

   4.16      Form of Common Stock Purchase Warrant
             issued by Markland Technologies, Inc. on
             September 21, 2004                                              8-K       September 23, 2004      99.5

   4.17      Lock-up Agreement by and among Markland
             Technologies, Inc., Robert Tarini, and
             Kenneth Ducey, Jr.                                              8-K       September 23, 2004      99.7

   4.18      Lock-up Agreement by and between Markland
             Technologies, Inc. and James, LLC.                              8-K       September 23, 2004      99.6


                                                           55


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                                                                                   INCORPORATED BY REFERENCE
                                                            FILED WITH      -------------------------------------------
                                                             THIS FORM                                         EXHIBIT
EXHIBIT NO.                  DESCRIPTION                      10-QSB          FORM         FILING DATE           NO.
-----------  --------------------------------------------   ----------      --------    ----------------      ---------

   4.19      Waiver Agreement by and among Markland
             Technologies, Inc. and the parties named
             therein, dated September 21, 2004                               8-K       September 23, 2004      99.8

   4.20      Amendment to Warrant No. CS-84                                  8-K       December 30, 2004       99.1

   4.21      Amendment to Warrant No. CS-85                                  8-K       December 30, 2004       99.2

   4.22      Form of New DKR Warrants                                        8-K       December 30, 2004       99.3

   4.23      Amendment to Warrant No. CS-83                                  8-K       December 30, 2004       99.4

   4.24      Amendment to Warrant No. CS-89                                  8-K       December 30, 2004       99.5

   4.25      Amendment to Stefansky Warrant                                  8-K        January 7, 2005        99.1

   4.26      Amendment to Rosenblum Warrant                                  8-K        January 7, 2005        99.2

   4.27      Amendment to Harborview Warrant                                 8-K        January 7, 2005        99.3

   4.28      Preferred Stock Restriction Agreement                           8-K        January 11, 2005       99.1

   4.29      Form of Warrant                                                 8-K        January 11, 2005       99.3

   4.30      Form of Preferred Stock Restriction
             Agreement Amendment                                             8-K        January 12, 2005       99.1

   4.31      Registration Rights Agreement between
             Markland Technologies, Inc., and Southridge
             Partners, LP, Southshore Capital Fund
             Limited, ipPartners, Inc., Verdi Consulting
             Inc., DKR Soundshore Oasis Holding Fund,
             Ltd., DKR Soundshore Strategic Holding Fund,
             Ltd. and Deer Creek Fund, LP for Markland
             Common Stock, dated February 14, 2005                           8-K        February 14, 2005       4.1

   4.32      Registration Rights Agreement between
             Technest Holdings, Inc., and Markland
             Technologies, Inc., dated February 14, 2005                     8-K        February 14,2005        4.2

   4.33      Registration Rights Agreement between
             Technest Holdings, Inc., and Southridge
             Partners, LP, Southshore Capital Fund
             Limited, ipPartners, Inc., Verdi Consulting
             Inc., DKR Soundshore Oasis Holding Fund,
             Ltd., DKR Soundshore Strategic Holding Fund,
             Ltd. and Deer Creek Fund, LP for Technest
             Series C Preferred Stock and Warrants for
             Technest common stock, dated February 14,
             2005                                                            8-K        February 14, 2005       4.3

   4.34      Registration Rights Agreement between
             Technest Holdings, Inc. and Jason Geng for
             registration of Earnout Shares, dated
             February 14, 2005                                               8-K        February 14, 2005       4.4

   4.35      Registration Rights Agreement between
             Markland Technologies, Inc., and Jason
             Geng, dated February 14, 2005                                   8-K        February 14, 2005       4.5

   4.36      Form of Technest Common Stock Purchase
             Warrant                                                         8-K        February 14, 2005       4.6

   4.37      Technest Series B Convertible Preferred
             Stock Certificate of Designations filed with
             the Secretary of State of Nevada on
             February 14, 2005                                               8-K        February 14, 2005       4.7

   4.38      Technest Series C Convertible Preferred
             Stock Certificate of Designations filed with
             the Secretary of State of Nevada on
             February 14, 2005                                               8-K        February 14, 2005       4.8


                                                           56


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                                                                                   INCORPORATED BY REFERENCE
                                                            FILED WITH      -------------------------------------------
                                                             THIS FORM                                         EXHIBIT
EXHIBIT NO.                  DESCRIPTION                      10-QSB          FORM         FILING DATE           NO.
-----------  --------------------------------------------   ----------      --------    ----------------      ---------

   4.39      Promissory Note issued to Jason Geng by
             Genex Technologies, Inc., dated February 14,
             2005                                                            8-K        February 14, 2005       4.9

   10.1      Securities Purchase Agreement, between
             Markland Technologies, Inc., Montana View
             Corporation, Elite Properties, Ltd., and
             Sparrow Ventures, Inc., dated April 2, 2004                    SB-2          May 11, 2004         10.1

   10.2      Securities Purchase Agreement by and among
             Markland Technologies, Inc. and the
             Investors named therein, dated April 16,
             2004.                                                          SB-2          May 11, 2004         10.2

   10.3      Securities Purchase Agreement by and
             between Markland Technologies, Inc. and the
             Investors named therein, dated May 3, 2004.                    SB-2          May 11, 2004         10.3

   10.4      Agreement and Plan of Merger by and among
             Markland Technologies, Inc. and STR
             Acquisition Corp., Security Technology,
             Inc., Science and Technology Research,
             Inc., and George Yang, dated September 30,
             2003.                                                           8K        November 12, 2003       10.1

   10.5      Promissory Note made by Markland
             Technologies, Inc., in favor of George
             Yang, dated September 30, 2003.                                 8K        November 12, 2003       10.4

   10.6      Security Agreement by and between Markland
             Technologies, Inc. and George Yang, dated
             September 30, 2003.                                            SB-2          May 11, 2004         10.6

   10.7      Guaranty by Markland Technologies, Inc. in
             favor of George Yang, dated September 30,
             2003.                                                          SB-2          May 11, 2004         10.7

   10.8      Amendment and Payment Extension Agreement
             by and between Markland Technologies, Inc.
             and George Yang, dated March 17, 2004.                         SB-2          May 11, 2004         10.8

   10.9      Loan Agreement by and between Security
             Technology, Inc. and Bay View Capital LLC,
             dated September 30, 2003.                                       8K        November 12, 2003       10.2

   10.10     Promissory Note by and among Markland
             Technologies, Inc., Security Technology,
             Inc., and Bay View Capital LLC, dated
             September 30, 2003.                                             8K        November 12, 2003       10.5

   10.11     Security Agreement by and between Security
             Technology, Inc. and Bay View Capital LLC,
             dated September 30, 2003.                                      SB-2          May 11, 2004         10.11

   10.12     Security Agreement by and between Markland
             Technologies, Inc. and Bay View Capital LLC.                   SB-2          May 11, 2004         10.12

   10.13     Sublicense Agreement by and between
             Markland Technologies, Inc. and ASI
             Technology Corporation, dated March 19,
             2004.                                                          SB-2          May 11, 2004         10.13

   10.14     ASI Technology Corporation SBIR Phase II
             Proposal, dated October 8, 2001.                              SB-2/1A       June 16, 2004         10.14

   10.15     ASI Technology Corporation Contract
             with Air Force Office of Scientific Research,
             dated August 1, 2002.                                         SB-2/1A       June 16, 2004         10.15

   10.16     ASI Technology Corporation Contract with
             Naval Surface Warfare Center, dated January
             31, 2003.                                                     SB-2/1A       June 16, 2004         10.16


                                                           57


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                                                                                   INCORPORATED BY REFERENCE
                                                            FILED WITH      -------------------------------------------
                                                             THIS FORM                                         EXHIBIT
EXHIBIT NO.                  DESCRIPTION                      10-QSB          FORM         FILING DATE           NO.
-----------  --------------------------------------------   ----------      --------    ----------------      ---------

   10.17     Stock Purchase Agreement by and among Ocean
             Data Equipment Corporation, Ergo Systems,
             Markland Technologies, and Security
             Technology, Inc., dated December 9, 2002.                       8-K        January 28, 2003       10.1

   10.18     Exchange Agreement, dated December 9, 2002,
             by and among Markland Technologies, Inc.,
             Market LLC, and James LLC.                                      8-K       December 20, 2002       10.4

   10.19     Exchange Agreement, dated December 9, 2002,
             by and among Eurotech, Ltd., Crypto.com
             Inc., Markland Technologies, Inc., Security
             Technology, Inc. ipPartners, Inc., Market
             LLC,  and James LLC.                                            8-K       December 20, 2002       10.5

   10.20     First Amendment to Exchange Agreement,
             dated December 9, 2002, by and among
             Eurotech, Ltd., Crypto.com Inc., Markland
             Technologies, Inc., Security Technology,
             Inc. ipPartners, Inc., Market LLC,  and
             James LLC.                                                    10-QSB      February 14, 2003       10.6

   10.21     Restated and Amended Convertible Revolving
             Credit Note Agreement, dated December 10,
             2002, by and between Markland Technologies,
             Inc. and Market LLC.                                          10-QSB      February 14, 2003       10.2

   10.22     Letter from Sherb & Co., LLP to the
             Commission, dated March 12, 2003,
             concerning change in certifying accountant.                     8-K         March 17, 2003        16.1

   10.23     Technology Purchase Agreement between
             Markland Technologies, Inc. and ASI
             Technology Corporation, dated March 19,
             2003.                                                           8-K         April 4, 2003         10.1

   10.24     Exchange Agreement, dated March 27, 2003,
             by and between Eurotech, Ltd. and Markland
             Technologies, Inc.                                              8-K         April 4, 2003         10.2

   10.25     Registration Rights Agreement, dated March
             27, 2003, by and between Eurotech, Ltd. and
             Markland Technologies, Inc.                                   10-KSB       October 14, 2003       10.12

   10.26     Amended and Restated Exchange Agreement,
             dated July 24, 2003, by and between
             Markland Technologies, Inc. and Syqwest,
             Inc.                                                            8-K         July 30, 2003         10.1

   10.27     Preferred Securities Purchase Agreement by
             and between Markland Technologies, Inc. and
             James LLC, dated February 2, 2003, relating
             to the issuance of 170 shares of Series C
             5% Convertible Preferred Stock.                               10-KSB       October 14, 2003       10.14

   10.28     Preferred Securities Purchase Agreement by
             and between Markland Technologies, Inc.,
             and James LLC, dated April 1, 2003,
             relating to the issuance of Series D
             Convertible Preferred Stock.                                  10-KSB       October 14, 2003       10.15

   10.29     Private Equity Credit Agreement by and
             between Markland Technologies, Inc. and
             Brittany Capital Management Limited, dated
             September 10, 2003.                                           10-KSB       October 14, 2003       10.16


                                                           58


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                                                                                   INCORPORATED BY REFERENCE
                                                            FILED WITH      -------------------------------------------
                                                             THIS FORM                                         EXHIBIT
EXHIBIT NO.                  DESCRIPTION                      10-QSB          FORM         FILING DATE           NO.
-----------  --------------------------------------------   ----------      --------    ----------------      ---------

   10.30     Employment and consulting agreements, dated
             December 5, 2002, for Delmar Kintner,
             Kenneth Ducey, Robert Tarini, and Verdi
             Consulting.                                                   10-KSB       October 14, 2003       10.18

   10.31     Nonexclusive License Agreement by and
             Science & Technology Research , Inc. and
             the Secretary of the Navy, dated 11/4/03.                      SB-2          May 11, 2004         10.31

   10.32     International Distribution Agreement
             between Markland Technologies, Inc. and
             Tradeways.                                                     SB-2          May 11, 2004         10.32

   10.33     Science & Technology Research contract
             Naval Surface Warfare Center, dated January
             31, 2003.                                                      SB-2          May 11, 2004         10.33

   10.34     Subcontract Agreement by and between ERGO
             Systems, Inc. and Computer Sciences
             Corporation ,dated December 8, 2003.                           SB-2          May 11, 2004         10.34

   10.35     Lease for Property in Fredericksburg,
             Virginia.                                                     SB-2/1A       June 16, 2004         10.35

   10.36     Co-Operative Research and Development
             Agreement between Markland Technologies,
             Inc. and the U.S. Air Force.                                  SB-2/1A       June 16, 2004         10.35

   10.37     Employment Agreement by and between
             Markland Technologies, Inc. and Robert
             Tarini, dated May 12, 2004 .                                  10-QSB         May 24, 2004         10.32

   10.38     Employment Agreement by and between
             Markland Technologies, Inc. and Kenneth
             Ducey, Jr., dated May 12, 2004.                               10-QSB         May 24, 2004         10.33

   10.39     Strategic Operations Contractor Agreement
             by and between Markland Technologies, Inc.
             and Asset Growth Company, dated May 12,
             2004.                                                         10-QSB         May 24, 2004         10.34

   10.40     Consulting Agreement by and between
             Markland Technologies, Inc. and Chad A.
             Verdi, dated May 12, 2004.                                    10-QSB         May 24, 2004         10.35

   10.41     Amendment to Employment Agreement between
             Markland Technologies Inc. and Robert
             Tarini dated June 16, 2004.                                   SB-2/1A       June 16, 2004         10.41
             Amendment to the Employment

   10.42     Agreement between Markland
             Technologies Inc. and Kenneth P. Ducey,
             dated June 16, 2004.                                          SB-2/1A       June 16, 2004         10.42

   10.43     Amendment to the Consulting Agreement
             between Markland Technologies Inc. and
             Verdi Consulting, dated June 16, 2004.                        SB-2/1A       June 16, 2004         10.43


                                                           59


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                                                                                   INCORPORATED BY REFERENCE
                                                            FILED WITH      -------------------------------------------
                                                             THIS FORM                                         EXHIBIT
EXHIBIT NO.                  DESCRIPTION                      10-QSB          FORM         FILING DATE           NO.
-----------  --------------------------------------------   ----------      --------    ----------------      ---------

   10.44     Amendment to the Strategic Operations
             Contractor Agreement by and between
             Markland Technologies, Inc. and Asset
             Growth Company, dated June 16, 2004.                          SB-2/1A       June 16, 2004         10.44

   10.45     Purchase Agreement between Markland
             Technologies, Inc. and the investors named
             therein, dated September 21, 2004.                              8-K       September 23, 2004      99.1

   10.46     Security Agreement between Markland
             Technologies, Inc. and the investors named
             therein, dated September 21, 2004.                              8-K       September 23, 2004      99.2

   10.47     Form of Secured Convertible Promissory Note
             issued by Markland Technologies, Inc., on
             September 21, 2004.                                             8-K       September 23, 2004      99.4

   10.48     Night Vision Electronic Sensors Directorate
             (NVESD) Omnibus Contract between E-OIR
             Measurement Inc., a subsidiary of EOIR and
             United States Army Night Vision and
             Electronic Sensors Directorate.                               10-KSB       October 13, 2004       10.48

   10.49     Securities Purchase Agreement between
             Markland Technologies, Inc., Harborview
             Master Fund L.P. and Southridge Partners LP
             dated November 9, 2004.                                        SB-2       November 10, 2004       10.50

   10.50     Form of Convertible Note issued to
             Harborview Master Fund L.P. and Southridge
             Partners LP.                                                   SB-2       November 10, 2004       10.51

   10.51     Form of Warrant issued to Harborview Master
             Fund L.P. and Southridge Partners LP.                          SB-2       November 10, 2004       10.52

   10.52     Subordination Agreement between DKR
             Soundshore Oasis Holding Fund, LLC DKR
             Soundshore Strategic Holding Fund, LLC,
             Harborview Master Fund L.P., Southridge
             Partners LP, and Markland Technologies,
             Inc., dated November 9, 2004.                                  SB-2       November 10, 2004       10.53

   10.53     Conditional Waiver and Consent between DKR
             Soundshore Oasis Holding Fund, LLC DKR
             Soundshore Strategic Holding Fund, LLC,
             Harborview Master Fund L.P., Southridge
             Partners LP, and Markland Technologies,
             Inc., dated November 9, 2004.                                  SB-2       November 10, 2004       10.54

   10.54     Stock Purchase Agreement by and between
             Markland and EOIR, dated June 30,
             2004                                                            8-K         June 30, 2004          2.1

   10.55     Forms of Promissory Note.                                       8-K         June 30, 2004          2.2


                                                           60


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                                                                                   INCORPORATED BY REFERENCE
                                                            FILED WITH      -------------------------------------------
                                                             THIS FORM                                         EXHIBIT
EXHIBIT NO.                  DESCRIPTION                      10-QSB          FORM         FILING DATE           NO.
-----------  --------------------------------------------   ----------      --------    ----------------      ---------

   10.56     Security Agreement by and between EOIR and
             sellers of EOIR stock, dated June 30, 2004.                     8-K         June 30, 2004          2.3

   10.57     2004 Stock Option Plan, adopted June 30,
             2004.                                                           8-K         June 30, 2004          2.4

   10.58     Preferred Securities Purchase Agreement.                        8-K         June 30, 2004          2.5

   10.59     Pledge and Security Agreement.                                  8-K         June 30, 2004          2.6

   10.60     Forms of Stock Option.                                          8-K         June 30, 2004          2.7

   10.61     Agreement and General Release, dated
             November 1, 2004, between Markland
             Technologies, Inc. and Gregory A. Williams.                    10-QSB     November 15, 2004      10.61

   10.62     Engagement Letter with Trilogy Capital
             Partners, Inc.                                                  8-K        December 9, 2004       99.1

   10.63     Form of Warrant issued to Trilogy Capital
             Partners, Inc., and the unaffiliated
             consultant                                                      8-K        December 9, 2004       99.2

   10.64     Waiver by and between the Company, DKR
             Soundshore Oasis Holding Fund Ltd., DKR
             Soundshore Strategic Holding Fund Ltd.,
             Harborview Master Fund L.P. and Southridge
             Partners LP.                                                    8-K       December 13, 2004       99.1

   10.65     Letter Agreement by and between the
             Company, DKR Soundshore Oasis Holding Fund
             Ltd., and DKR Soundshore Strategic Holding
             Fund Ltd.                                                       8-K       December 13, 2004       99.2

   10.66     Employment Agreement with Robert Tarini                         8-K        January 7, 2005        99.4

   10.67     Employment Agreement with Ken Ducey                             8-K        January 7, 2005        99.5

   10.68     Employment Agreement with Joseph Mackin                         8-K        January 7, 2005        99.6

   10.69     Employment Agreement with Gino Pereira                          8-K        January 7, 2005        99.7

   10.70     Strategic Operations Contractor Agreement
             with Asset Growth Company                                       8-K        January 7, 2005        99.8

   10.71     Consultant Agreement with Verdi Consulting                      8-K        January 7, 2005        99.9

   10.72     Finder Agreement between Technest Holdings,
             Inc. and Greenfield Capital, dated February
             14, 2005                                                        8-K        February 14, 2005      10.1

   10.73     Escrow Agreement between Markland
             Technologies, Inc., Technest Holdings, Inc.,
             Genex Technologies, Inc., Jason Geng, and
             Wilmington Trust Company, dated February __,
             2005                                                            8-K        February 14, 2005      10.2

   10.74     Lock-Up Agreement of Jason Geng, dated
             February 14, 2005                                               8-K        February 14, 2005      10.3

   10.75     Employment Agreement between Genex
             Technologies, Inc. and Jason Geng dated
             February 14, 2005                                               8-K        February 14, 2005      10.4

   10.76     Lock-up Agreement between Technest Holdings,
             Inc., Garth LLC and Southshore Capital Fund
             Ltd., dated February 14, 2005                                   8-K        February 14, 2005      10.5

   10.77     Form of Option to be granted under the 2004
             Markland Stock Incentive Plan                                   8-K        February 14, 2005      10.7

   10.78     Agreement between Genex Technologies, Inc.
             and Ocean Tomo                                                  8-K        February 14, 2005      10.8


                                                           61


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                                                                                   INCORPORATED BY REFERENCE
                                                            FILED WITH      -------------------------------------------
                                                             THIS FORM                                         EXHIBIT
EXHIBIT NO.                  DESCRIPTION                      10-QSB          FORM         FILING DATE           NO.
-----------  --------------------------------------------   ----------      --------    ----------------      ---------

   10.79     February 14, 2005 Markland Press Release                        8-K        February 14, 2005      10.9

             Certification by CEO of Periodic Report

   31.1      Pursuant to Rule 13a-14(a) or Rule 15d-14(a)        X
             Certification by CFO of Periodic Report

   31.2      Pursuant to Rule 13a-14(a) or Rule 15d-14(a)        X
             Certification by CEO and CFO of Periodic

   32.1      Report Pursuant to 18 U.S.C. Section 1350           X

   99.1      Articles of Merger merging MTECH
             Acquisition, Inc. with and into Genex
             Technologies, Inc., filed with the Secretary
             of the State of Maryland on February 14,
             2005                                                X

   99.2      Articles of Merger merging MTECH
             Acquisitions with and into Genex
             Technologies, Inc., filed with the Secretary
             of the State of Delaware on February 14,
             2005                                                X
</TABLE>

                                                           62