UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549




FORM
10-KSB/A


(Amendment
no. 1)






x
            ANNUAL
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934For
      the Fiscal Year Ended June 30, 2008.o
            TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934


Commission
File Number 000-27023




Technest Holdings,
Inc.





(Exact name of Registrant as
specified in its Charter)




Nevada
              (State or other
      jurisdiction
              of incorporation or
      organization)
              
              10411
      Motor City Drive, Suite 650, Bethesda, MD
              (Address
      of principal executive offices)
              
              10411 Motor City Drive, Suite 650, Bethesda,
      MD
              (Mailing
      Address)
            88-0357272
              (I.R.S. Employer Identification
      No.)
              
              
              20817
              (Zip
      Code)





Issuer’s
Telephone Number: (301) 767-2810




Securities
registered pursuant to Section 12(b) of the Act:




Title
      of Class
            
            Name
      of each exchange on which registeredNone
            
            Not
      Applicable





Securities
registered pursuant to Section 12(g) of the Exchange Act:




Common Stock, par value
$0.001 per share


(Title or
Class)




Check
whether the issuer is required to file reports pursuant to Section 13 or 15(d)
of the Exchange Act  [X] Yes [  ] No





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




Check if
there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant’s knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [  ]
















Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).  [  ]  Yes  [ X ]
No





The
issuer’s revenues for the year ended June 30, 2008, excluding discontinued
operations in accordance with Statement of Financial Accounting Standard No.
144, were $2,469,085.





The
aggregate market value of the voting and non-voting common equity held by
non-affiliates* computed by reference to the price at which the common equity
was sold, or the average bid and asked price of such common equity, as of
September 29, 2008 (See definition of affiliate in Rule 12b-2 of the Exchange
Act.) was: $3,280,942







*
            Affiliates
      for the purpose of this item refers to the issuer’s officers and directors
      and/or any persons or firms (excluding those brokerage firms and/or
      clearing houses and/or depository companies holding issuer’s securities as
      record holders only for their respective clienteles’ beneficial interest)
      owning 5% or more of the issuer’s common stock, both of record and
      beneficially.







APPLICABLE
ONLY TO CORPORATE REGISTRANTS




State the
number of shares outstanding of each of the issuer’s classes of common equity,
as of the latest practicable date:




20,676,739
shares as of October 15, 2008, all of one class of common stock, $0.001 par
value.









DOCUMENTS
INCORPORATED BY REFERENCE




Documents
Incorporated by reference:  None




Transitional
Small Business Disclosure Format (check one): Yes [   ]  No
[X]





EXPLANATORY
NOTE








This
Annual Report on Form 10-KSB/A (“Amendment No. 1”) is being filed to amend
our Annual Report on Form 10-KSB for the year ended June 30, 2008, filed on
October 2, 2008 (the “Original Filing”). This Form 10-KSB/A amends and restates
Part III, Items 9, 10, 11, 12, 13 and 14, in their entirety, in order to provide
required disclosure within 120 days following the end of our fiscal year,
because we have not yet filed a definitive proxy statement or information
statement with the Securities and Exchange Commission. The remainder of the
Original Filing is unchanged and is not reproduced in this Form 10-KSB/A. Except
as otherwise indicated, this Form 10-KSB/A speaks as of the date of the Original
Filing and reflects only the changes discussed above. No other information in
the Original Filing, including our financial statements and the notes to the
financial statements, has been modified or updated in any way.




This
Amendment No. 1 should be read in conjunction with our periodic filings
made with the Securities and Exchange Commission, or the SEC, subsequent to the
date of the Original Filing, including any amendments to those filings, as well
as any current reports filed on Form 8-K subsequent to the date of the
Original Filing. In addition, in accordance with applicable rules and
regulations promulgated by the SEC, this Form 10-KSB/A includes updated
certifications from our Chief Executive Officer and Chief Financial
Officer as exhibits 31.1, 31.2 and 32.1.





2












TECHNEST
HOLDINGS, INC.


FORM
10-KSB/A


TABLE
OF CONTENTS


June
30, 2008










Part
      III
            
            Page
      NumberItem
      9.
            Directors
      and Executive Officers of the Registrant and Corporate Governance;
      Compliance with Section 16(a) of the Exchange Act
            4Item
      10.
            Executive
      Compensation
            6Item
      11.
            Security
      Ownership of Certain Beneficial Owners and Managementand Related
      Stockholder Matters
            13Item
      12.
            Certain
      Relationships and Related Transactionsand Director
      Independence
            15Item
      13.
            Exhibits
            17Item
      14.
            Principal
      Accountant Fees and Services
            17










3





Part
III






ITEM
      9.
            DIRECTORS
      AND EXECUTIVE OFFICERS OF THE REGISTRANT AND CORPORATE GOVERNANCE;
      COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE
  ACT




Our
current directors and executive officers are:




Name
            Age
            Position
            Year
      BeganGino
      M. Pereira
            51
            Chief
      Executive Officer, President,
              Chairman
      of the Board of Directors
            2005Nitin
      V. Kotak
            51
            Chief
      Financial Officer
            2005Robert
      A. Curtis
            54
            Director
            2008Laurence
      J. Ditkoff
            48
            Director
            2008David
      R. Gust
            66
            Director
            2006Stephen
      M. Hicks
            49
            Director
            2008Henry
      Sargent
            41
            Director
            2008


_______________________


Our
executive officers are appointed by, and serve at the discretion of, our board
of directors.







Gino M.
Pereira has been our Chief Executive Officer since January 1, 2008 and
had been our Chief Financial Officer since February 14, 2005. On January 6,
2006, Mr. Pereira was elected to our Board of Directors. Mr. Pereira currently
serves on the Board of Directors of Teletrak Environmental Systems. From 1991
through 2000, Mr. Pereira was employed by CDC Technologies, Inc., located in
Oxford, Connecticut. From 1991 through 1998, Mr. Pereira was CDC Technologies'
Executive Vice President and Chief Financial Officer. In 1999, Mr. Pereira
assumed the role of Chief Operating Officer of CDC Technologies. Mr. Pereira
remained in that role through 2000. In January 2001, Mr. Pereira assumed the
position of Chief Operating Officer of CDC Acquisition Corporation, a subsidiary
company of Drew Scientific Group plc. Mr. Pereira remained in that position
until November 2001, when he became a principal at Interim Management Solutions
in Oxford, Connecticut. During his tenure at Interim Management Solutions, Mr.
Pereira has acted as an interim or part-time Chief Financial Officer or Chief
Operations Officer for numerous small and emerging companies. In January 2003,
Mr. Pereira also became a Managing Director of Kiwi Securities, Inc., an
independently owned investment banking firm, a post he held until December 7,
2004. Mr. Pereira is a Fellow of the Chartered Association of Certified
Accountants (UK).





Nitin V.
Kotak has been our Chief Financial Officer since January 1, 2008 and had
been our Vice President, Finance & Operations since November
2005.  Mr. Kotak has more than 25 years of experience in managing
finance, accounting, reporting, investor relations, taxation and information
technology functions in various industries and countries. Prior to joining
Technest, Mr. Kotak was the Vice President of Finance & Accounting for Able
Laboratories, Inc., New Jersey, a publicly traded company with a market
capitalization of about $ 500 million from October 2003. Prior to joining Able,
from December 1999 to September 2003, Mr. Kotak was the Chief Financial Officer,
Corporate Secretary and the Finance Member of the Board of Directors of Mattel
Toys (India) Private Limited, a wholly owned subsidiary of Mattel Inc. Mr. Kotak
is a Fellow of the Chartered Association of Certified Accountants (India). Mr.
Kotak received his Bachelor of Commerce in Accounting from the University of
Calcutta.





Dr. Robert A.
Curtishas served on our Board of Directors since January 14,
2008.  Dr. Curtis is currently the Chief Executive Officer of the
Regional Technology Development Corporation in Woods Hole, Massachusetts, an
innovation accelerator broadly focused on starting new companies based on
technology discovered and developed from the Woods Hole Oceanographic
Institution and the Marine Biological Laboratory.  He was most
recently co-founder, President and CEO of HistoRx, Inc. a tissue based
diagnostics company formed with the Yale University School of
Medicine.  Over the last 17 years, he has founded or been directly
involved in the early stages of nine start-up companies, primarily in the life
sciences area including Combichem, Inc, Pharmacopeia, Inc, MetaMorphix, Inc,
Cape Aquaculture Technologies, Inc. and Cambridge Neuroscience, Inc. Prior to
his entrepreneurial activities, Dr. Curtis held a variety of positions at
Pfizer, Inc., including Director of Licensing and Development, where he was
responsible for worldwide pharmaceutical licensing and technology acquisition.
He started his career as an Assistant Professor at the University of Illinois
Medical Center in Chicago. Dr. Curtis earned a B.S. degree in Pharmacy from the
Massachusetts College of Pharmacy, a Doctor of Pharmacy degree and Residency in
Clinical Pharmacology from the University of Missouri, and a M.B.A. from
Columbia University. Dr. Curtis is currently an advisor to a number of private
entrepreneurial companies and has served as a judge for the MIT $50K
Entrepreneurial Award-Business Plan Competition.





4








Laurence J.
Ditkoff, CFA, CPA, has served on our Board of Directors since March 11,
2008. Mr. Ditkoff is the Director of Research for Southridge LLC and responsible
for investment evaluation and selection, due diligence, and transaction
structuring. He joined Southridge in 2000. He spent 14 years at Bell Atlantic
Corporation and NYNEX, where he was responsible for financial oversight, cash
flow forecasting, financial statement analysis, competitive threat analysis, and
financial evaluation of new products. Mr. Ditkoff received a BA in Accounting
from the University of Pennsylvania, and an MBA in Finance from Pace University,
NY. He is a Certified Public Accountant for the State of New York.





Major General
David R. Gust, USA, Ret.has served on our Board
of Directors and as the chairperson of our Compensation Committee since March
15, 2006. Since April 2007, General Gust has been the President of USfalcon, a
privately-held company working with the US Defense sector, primarily in
information technology. Previously, General Gust had served as the Manager for
Federal Telecommunications for Bechtel National, Inc. from November 2004 to
March 2007. Prior to that, he was the President and Chief Executive Officer of
Technical and Management Services Corporation from 2000 to 2004. General Gust
retired from the United States Army in 2000 after completing a career of 34
years of service. At retirement, he was the US Army Deputy Chief of Staff for
Research, Development and Acquisition, Army Material Command. General Gust
received his B.S. in Electrical Engineering from the University of Denver and
Master’s Degrees in Systems Management and National Security and Strategy from
the University of Southern California and the United States Naval War College,
respectively.





Stephen M.
Hicks has served on our Board of Directors since March 11, 2008. Mr.
Hicks is the Chief Executive Officer and founding principal of Southridge LLC.
Mr. Hicks sets the overall strategic direction for the Southridge group of
companies, and is responsible for business development and execution. Mr. Hicks
founded Southridge Capital Management, an investment firm that provides capital
to growing enterprises internationally, in 1996. Active in the investment
industry for over 20 years, Mr. Hicks has broad experience in financial
structuring, derivatives, risk arbitrage, and investment banking. He received
his BS in Business Administration from King’s College in Briarcliff Manor, New
York, and an MBA from Fordham University, in New York City.





Henry Sargent,
JD, CFA, has served on our Board of Directors since March 11, 2008. Mr.
Sargent is the Chief Compliance and Chief Operating Officer of Southridge LLC.
His responsibilities include investment selection, deal structuring and
monitoring, workouts, and reorganization. Prior to joining Southridge in 1998,
Mr. Sargent spent several years at a New York-based corporate and securities law
firm, specializing in private placements, venture capital financing, and
corporate reorganizations. He received a BA from Connecticut College and his JD
from Fordham University School of Law, NY. Mr. Sargent is a member of the New
York Bar Association, the CFA Institute, and the New York Society of Security
Analysts.





5














Code of
Ethics





The board
of directors has adopted a code of ethics applicable to all of our directors,
officers and employees, including our principal executive officer, principal
financial officer and principal accounting officer. A copy of the Code of Ethics
is available at our website www.technestinc.com.





Section
16(a) Beneficial Ownership Reporting Compliance




Our
executive officers and directors and persons who own beneficially more than ten
percent of our equity securities are required under Section 16(a) of the
Securities Exchange Act of 1934 to file reports of ownership and changes in
their ownership of our securities with the Securities and Exchange
Commission.  They must also furnish copies of these reports to
us.  Based solely on a review of the copies of reports furnished to us
and written representations that no other reports were required, we believe that
for fiscal year 2007 our executive officers, directors and 10% beneficial owners
complied with all applicable Section 16(a) filing requirements, except that Mr.
Ditkoff filed a late Form 3 on March 24, 2008 upon being elected to the board of
directors and Aberdeen Avenue LLC filed a late Form 3 on October 12, 2007 upon
becoming a 10% beneficial owner.







ITEM
10.           EXECUTIVE
COMPENSATION




Executive
Officer Compensation





Summary
Compensation:The following table sets forth certain
compensation information for our chief executive officer and our other most
highly compensated executive officer (other than our chief executive officer)
who served as an executive officer during the year ended June 30, 2008 and whose
annual compensation exceeded $100,000 for that year.







Summary
Compensation Table




Name
      and Principal Position
            Year
            
            Salary
                ($)
            
            
            Bonus
                ($)
            
            
            Stock
                Awards
      ($)
            
            
            All
      other compensation ($)
            
            
            Total
      ($)Gino
      M. Pereira (1)
            2008
            
            $
            350,000
            
            
            $
            -
            
            
            $
            -
            
            
            $
            420,500
            (2)
            
            $
            770,500Chief
      Executive Officer and President
            2007
            
            
            212,413
            (3)
            
            
            (4
            )
            
            
            367,200
            (5)
            
            
            50,608
            (6)
            
            
            630,221Nitin
      V. Kotak (7)
              Chief
      Financial Officer
            2008
            
            $
            185,000
            
            
            $
            -
            
            
            $
            22,500
            (8)
            
            $
            11,100
            (9)
            
            $
            218,600Joseph
      P. Mackin (10)
            2008
            
            $
            175,000
            
            
            $
            -
            
            
            $
            -
            
            
            $
            420,500
            (11)
            
            $
            595,500Former
      Chief Executive Officer and President
            2007
            
            
            361,891
            
            
            
            (12
            )
            
            
            (13
            )
            
            
            72,615
            (14)
            
            
            434,506


_____________________________


(1)
            On
      January 1, 2008 upon the closing of the sale of EOIR Technologies, Inc. to
      EOIR Holdings, LLC, Mr. Pereira became the Chief Executive Officer and
      President of Technest. Prior to becoming the Chief Executive Officer, Mr.
      Pereira was the Chief Financial Officer of
  Technest.








6





(2)
            Consists
      of (i) $350,000 paid to Mr. Pereira in accordance with his March 13, 2006
      employment agreement upon the sale of EOIR Technologies, Inc., (ii)
      $60,000 paid to Mr. Pereira as the executive’s fixed amount per month for
      auto expense, business office expense and other personal expenses pursuant
      to Mr. Pereira’s March 13, 2006 employment agreement, and (ii) $10,500 as
      Technest’s matching and safe harbor contributions under its 401(k)
      plan.





(3)
            In
      accordance with Mr. Pereira’s employment agreement dated March 13, 2006,
      Mr. Pereira was required to devote at least sixty percent of his working
      time to Technest. In addition, during the year ended June 30, 2007, Mr.
      Pereira performed a certain percentage of work for Markland Technologies,
      Inc.





(4)
            In
      the fiscal year ended June 30, 2008, Mr. Pereira was paid a bonus of
      $52,500 for services performed during the fiscal year ended June 30,
      2006.





(5)
            Pursuant
      to Mr. Pereira’s March 13, 2006 employment agreement, Mr. Pereira was to
      receive an initial award of 72,000 shares, which were to be issued on the
      first business day after Technest has filed a registration statement on
      Form S-8 registering the 2006 Stock Award Plan and were to vest in three
      equal installments on April 1, 2007, July 1, 2007 and October 1, 2007. The
      registration statement on Form S-8 was filed on August 7, 2007. On August
      21, 2007, Technest issued Mr. Pereira 72,000 shares. The fair value of the
      stock award was estimated on the grant date in accordance with FAS
      123R.





(6)
            Consists
      of (i) $38,000 paid to Mr. Pereira as the executive’s fixed amount per
      month for auto expense, business office expense and other personal
      expenses pursuant to Mr. Pereira’s employment agreement, and (ii) $12,608
      as Technest’s matching and safe harbor contributions under its 401(k)
      plan.





(7)
            On
      January 1, 2008, Mr. Kotak became the Chief Financial Officer upon the
      sale of EOIR Technologies, Inc. to EOIR Holdings, LLC. Prior to becoming
      the Chief Financial Officer, Mr. Kotak was the Vice President, Finance
      & Operations of Technest.





(8)
            Pursuant
      to Mr. Kotak’s January 14, 2008 employment agreement, he received an
      initial award of 50,000 shares of Common Stock which shall vest on January
      14, 2009 provided Mr. Kotak continues to provide services to Technest. The
      fair value of the stock award was estimated on the grant date in
      accordance with FAS 123R.





(9)
            Consists
      of Technest’s matching and safe harbor contributions under its 401(k)
      plan.





(10)
              On
      March 13, 2006, Dr. Mackin was appointed the Chief Executive Officer and
      Chairman of the Board of Directors of Technest. On December 31, 2007, in
      conjunction with the closing of the sale of EOIR Technologies, Inc. to
      EOIR Holdings, LLC, Dr. Mackin resigned as the Chief Executive Officer,
      President and Chairman of the Board of
  Directors.





(11)
              Consists
      of (i) $350,000 paid to Dr. Mackin in accordance with his March 13, 2006
      employment agreement upon the sale of EOIR Technologies, Inc., (ii)
      $60,000 paid to Dr. Mackin as the executive’s fixed amount per month for
      auto expense, business office expense and other personal expenses pursuant
      to his March 13, 2006 employment agreement, and (ii) $10,500 as Technest’s
      matching and safe harbor contributions under its 401(k)
    plan.





(12)
              In
      the fiscal year ended June 30, 2008, Dr. Mackin was paid a bonus of
      $105,000 for services performed during the fiscal year ended June 30,
      2006.





(13)
              Pursuant
      to Dr. Mackin’s employment agreements with Technest which was entered into
      on March 13, 2006, Dr. Mackin was to receive an initial award of 120,000
      shares, which were to be issued on the first business day after Technest
      has filed a registration statement on Form S-8 registering the 2006 Stock
      Award Plan and were to vest in three equal installments on April 1, 2007,
      July 1, 2007 and October 1, 2007.  On July 30, 2007, Dr. Mackin
      forfeited his right to receive 120,000 shares. The fair value of Dr.
      Mackin’s stock award on the grant date in accordance with FAS 123R was
      $612,200. Please see Note 8 to our financial statements for further
      information.





7








In August
2006, Dr. Mackin received 23,915 shares of Technest common stock as
consideration for the subordination of Dr. Mackin’s security interest to Silicon
Valley Bank; such shares are subject to forfeiture if prior to February 10, 2008
(18-months from the anniversary of the closing date of the bank financing with
Silicon Valley Bank) Dr. Mackin voluntarily terminates his services or is
terminated for cause. These shares were no longer subject to forfeiture upon the
sale of EOIR Technologies, Inc. The fair value of these shares on the grant date
in accordance with FAS 123R was $69,347.





(14)
              Consists
      of (i) $60,000 paid to Dr. Mackin as the executive’s fixed amount per
      month for auto expense, business office expense and other personal
      expenses pursuant to Dr. Mackin’s employment agreement, and (ii) $12,615
      as Technest’s matching and safe harbor contributions under its 401(k)
      plan.








Outstanding Equity Awards at Fiscal
Year-End.





The
following table sets forth certain information regarding stock awards as of June
30, 2008 by the executive officers named in the summary compensation
table.








Outstanding
Equity Awards at Fiscal Year-End





Stock
      AwardsName
            
            Number
      of
                Shares
      That
                Have
      Not
                Vested
                (#)
            
            
            Market
      Value of Shares That
                Have
      Not Vested
                ($)
      (1)Nitin
      V. Kotak (2)
            
            
            50,000
            
            
            $
            22,500


_______________________


(1)
            In
      accordance with Item 402 of Regulation S-B, the market value of the shares
      was calculated using the closing price of the Company’s common stock as
      reported by NASDAQ on June 30, 2008, the last trading day of the Company’s
      fiscal year, of $0.45.


(2)
            Pursuant
      to Mr. Kotak’s January 14, 2008 employment agreements with Technest, Mr.
      Kotak received an initial award of 50,000 shares which shall vest on
      January 14, 2009 provided Mr. Kotak continues to provide services to
      Technest.








Impact
of Sale of EOIR Technologies, Inc.




On
September 10, 2007, Technest and its wholly-owned subsidiary, E-OIR
Technologies, Inc. (“EOIR”), entered into a Stock Purchase Agreement with EOIR
Holdings LLC, a Delaware limited liability company (“LLC”), pursuant to which
Technest will sell EOIR to LLC (the “Sale”).  LLC is an entity formed
on August 9, 2007 for the purposes of facilitating this transaction and is an
affiliate of The White Oak Group, Inc., an Atlanta, Georgia based private
investment firm focused on investments in the aerospace and defense industry,
with an emphasis on the following sectors: Homeland security (detection and
deterrence); avionics and instrumentation; command and control; and
communication networks and services.







8





On
October 23, 2007, stockholders of the Company holding in excess of a majority of
the outstanding shares of the Company's common stock, constituting the sole
class of voting securities of the Company, executed and delivered to the Company
their consent approving the Stock Purchase Agreement and the transactions
contemplated thereby. The stockholder consent is sufficient under Nevada law to
approve the Stock Purchase Agreement without the requirement of any other
stockholder vote. No further action of the stockholders is required to approve
the Sale.  Pursuant to Regulation 14C under the Securities Exchange
Act of 1934, as amended, an information statement must be transmitted to
Technest’s stockholders prior to such action by written consent becoming
effective; such action is effective on the twentieth (20th) day following the
date a definitive information statement is first sent to the stockholders of
Technest.  The definitive information statement was first sent to the
stockholder on December 7, 2007 and therefore, the corporate action was
effective as of December 27, 2007.




On
December 31, 2007, Technest sold and LLC acquired 100% of the issued and
outstanding shares of capital stock of EOIR for $11 million in cash at the
closing.  In addition to the initial cash payment, LLC has agreed to
pay Technest an additional contingent payment of $23 million if, on or prior to
December 31, 2009, EOIR is awarded the follow-on of the U.S. Army's Night Vision
and Electronics Sensors Directorate (NVESD) contract. On August 4, 2008, EOIR
was awarded the NVESD contract with a funding ceiling of $495 million. The
contingent purchase price of $23 million was due as of August 21, 2008 in
accordance with the Stock Purchase Agreement.




On August
26, 2008, LLC notified Technest that, in their opinion, the conditions set forth
in the Stock Purchase Agreement triggering payment of the contingent purchase
price have not been satisfied. LLC provided no explanation for its
contention.  Technest strongly believes that all conditions of the
Stock Purchase Agreement were met, and LLC’s position is without merit. Technest
is aggressively pursuing payment of the Contingent Purchase Price in accordance
with the Stock Purchase Agreement.  Accordingly on September 24, 2008,
Technest notified LLC that it has filed for final and binding arbitration of the
matter in accordance with the terms of the Stock Purchase
Agreement.  Technest is seeking payment of approximately $22 million
from LLC representing the contingent portion of the purchase price to be paid by
LLC upon the successful re-award to EOIR of the contract with the NVESD less an
amount due to LLC for a final working capital adjustment.




Dr.
Mackin and Mr. Pereira’s Employment Agreements




Dr.
Mackin and Mr. Pereira’s employment agreements with Technest dated March 13,
2006 provided that if the executive’s employment was terminated without cause,
then Technest would continue to pay the executive’s annual salary payments
through the term of the employment agreement (the “Severance
Payment”).  On September 7, 2007, the board of directors of Technest
unanimously approved a resolution which provided that upon the closing of the
Sale, Dr. Mackin and Mr. Pereira would be paid one year of the Severance Payment
($350,000) and that upon the payment of the contingent purchase price, if any,
Dr. Mackin and Mr. Pereira will be entitled to receive the remaining portion of
their Severance Payment.  As of the closing date of December 31, 2007,
Dr. Mackin and Mr. Pereira would each be entitled to receive $785,833 upon
Technest’s receipt of the contingent purchase price.  If the
contingent purchase price is not paid, then Dr. Mackin and Mr. Pereira will each
forfeit his right to receive the remaining portion of the Severance
Payment.  Technest, Dr. Mackin and Mr. Pereira entered into agreements
on December 31, 2007 which terminated their March 13, 2006 employment agreements
and reflected the board’s decision of September 7, 2007.  These
agreements were filed as exhibits 10.8 and 10.9 to Technest’s quarterly report
on Form 10-QSB for the quarter ended December 31, 2007 filed on February 19,
2008.




Dr.
Mackin’s employment agreement was filed as exhibit 10.3 to our current report on
Form 8-K filed on March 17, 2006 and Mr. Pereira’s employment agreement was
filed as exhibit 10.4 to the same report.




Dr.
Mackin’s Outstanding EOIR Promissory Note




On June
29, 2004, all of the outstanding stock of EOIR was sold by the stockholders of
EOIR to Markland Technologies, Inc.  The purchase price was paid to
the selling stockholders in the form cash and promissory notes.  The
Company’s Chief Executive Officer, Joseph P. Mackin, was a stockholder of EOIR
and received a promissory note in connection with the above described
transaction.  The outstanding principal amount of the promissory note
was $608,957.  Pursuant to the terms of the Stock Purchase Agreement,
at the closing, LLC repaid the indebtedness of EOIR.  Therefore, Dr.
Mackin received $608,957 at the closing in connection with the repayment of the
promissory note held by him.







9










Dr.
Mackin’s Shares of Common Stock




As
consideration for the subordinating of his security interest pertaining to his
outstanding EOIR note, Dr. Mackin received 23,913 restricted shares of the
Company’s common stock.  Upon the completion of the Sale, these shares
were no longer subject to forfeiture.




Employment
Agreement with Gino M. Pereira





On
January 14, 2008, Technest Holdings, Inc. entered into a new employment
agreement with our Chief Executive Officer, Mr. Gino M. Pereira.  Mr.
Pereira’s employment agreement provides for:




·
            a
      term of five years beginning on January 14,
  2008;





·
            a
      base salary of $350,000 per year, which is the same base salary as set
      forth in Mr. Pereira’s prior employment agreement (the “Annual
      Salary”);




·
            payment
      of all necessary and reasonable out-of-pocket expenses incurred by Mr.
      Pereira in the performance of his duties under the
    agreement;




·
            $5,000
      per month for auto expense, business office expense and other personal
      expenses, which is the same amount as set forth in Mr. Pereira’s prior
      employment agreement;




·
            eligibility
      to receive a performance based bonus of 5% of  Technest’s EBITDA
      (Earning Before Interest, Taxes, Depreciation and Amortization) calculated
      on an annual basis at the end of Technest’s fiscal year, up to a maximum
      allowable cash bonus of 300% of the Annual Salary (the “EBITDA Bonus”),
      payable by Technest within 90 days of the end of Technest’s fiscal year;
      and




·
            eligibility
      to receive a performance based stock award under Technest’s 2006 Stock
      Award Plan calculated by dividing (x) 7% of the increase, if any, of the
      Market Capitalization (as defined below) of Technest’s Common Stock as of
      the prior fiscal year end compared to the following fiscal year end, by
      (y) the closing price of Technest’s Common Stock on the trading day
      immediately prior to the issuance of such shares (the “Market Cap Bonus
      Shares”).  Such Market Cap Bonus Shares shall be issued within 7
      days of the end of the Company’s fiscal year.  For purposes of
      the employment agreement, “Market Capitalization” shall mean the average
      closing price of Technest’s Common Stock as traded on the Over-the-Counter
      Bulletin Board (or if the Common Stock is no longer listed on that market,
      the principal securities exchange or trading market on which the Common
      Stock is listed, quoted or traded), for 20 consecutive trading days ending
      immediately prior to the measurement date, multiplied by the average
      number of shares of Technest’s Common Stock outstanding for the same 20
      consecutive trading days.






The
employment agreement provides that in the event that Mr. Pereira's engagement
with Technest is terminated by Technest without cause (as that term is defined
in Section 8(b) of the agreement), or by Mr. Pereira for “Good Reason” (as that
term is defined in Section 8(c) of the agreement), Technest will continue to pay
Mr. Pereira's Annual Salary and provide health insurance for a period of one
year from the date of termination plus the EBITDA Bonus and the Market Cap Bonus
Shares as calculated in Section 8(f) of the agreement. In the event that Mr.
Pereira is terminated by Technest as a result of a Change of Control (as defined
in the agreement) or Mr. Pereira terminates his employment for Good Reason as a
result of a Change of Control, he would be entitled to two times the Annual
Salary, plus the EBITDA Bonus and the Market Cap Bonus Shares as calculated in
Section 8(g) of the agreement. In the event that Mr. Pereira's employment with
Technest is terminated for any other reason, there will be no continuation of
cash salary payments or health insurance.





The above
description summarizes the material terms of Mr. Pereira’s employment agreement,
which is filed as Exhibit 10.1 to our Current Report on Form 8-K filed on
January 18, 2008 and is incorporated by reference herein. For further
information on Mr. Pereira’s employment agreement, please refer to Exhibit
10.1.








10





Employment
Agreement with Nitin V. Kotak





On
January 14, 2008, Technest entered into an employment agreement with our Chief
Financial Officer, Mr. Nitin V. Kotak.  Mr. Kotak’s employment
agreement provides for:




·
            a
      term of five years beginning on January 14,
  2008;





·
            An
      initial base salary of $220,000 per year (the “Annual
      Salary”);




·
            payment
      of all necessary and reasonable out-of-pocket expenses incurred by Mr.
      Kotak in the performance of his duties under the
  agreement;





·
            eligibility
      to receive cash bonuses as determined by the board of directors;
      and




·
            eligibility
      to receive equity awards under Technest’s 2006 Stock Award Plan as
      determined by the board of directors, with an initial award of 50,000
      shares of Common Stock which shall vest on January 14, 2009 provided Mr.
      Kotak continues to provide services to
Technest.





The
employment agreement provides that in the event that Mr. Kotak's engagement with
Technest is terminated by Technest without cause (as that term is defined in
Section 8(b) of the agreement), or by Mr. Kotak for “Good Reason” (as that term
is defined in Section 8(c) of the agreement), Technest will continue to pay Mr.
Kotak's Annual Salary and provide health insurance for a period of one year from
the date of termination. In the event that Mr. Kotak is terminated as a result
of a Change of Control (as defined in the agreement), he would be entitled to
his Annual Salary. In the event that Mr. Kotak's employment with Technest is
terminated for any other reason, there will be no continuation of cash salary
payments or health insurance.





The above
description summarizes the material terms of Mr. Kotak’s employment agreement,
which is filed as Exhibit 10.2 to our Current Report on Form 8-K filed on
January 18, 2008 and is incorporated by reference herein. For further
information on Mr. Kotak’s employment agreement, please refer to Exhibit
10.2.







Director
Compensation




Summary
Compensation:The following table sets forth certain
information about the compensation we paid or accrued with respect to our
directors who served during the year ended June 30, 2008.





Name
      and Principal Position
            
            Director
                Fees
                ($)
      (1)
            
            
            Stock
      Awards
                ($)(2)
            
            
            All
      other compensation
                ($)
            
            
            Total
      ($)Robert
      A. Curtis (3)
            
            
            —
            
            
            $
            20,411
            (3)
            
            
            —
            
            
            $
            20,411Darlene
      Deptula-Hicks (4)
            
            $
            5,208
            
            
            
            —
            
            
            
            —
            
            
            $
            5,208Laurence
      Ditkoff (5)
            
            
            —
            
            
            $
            5,000
            (5)
            
            
            
            
            
            $
            5,000Robert
      Doto (6)
            
            $
            22,192
            
            
            
            —
            
            
            
            —
            
            
            $
            22,192David
      R. Gust (7)
            
            $
            25,000
            
            
            $
            26,500
            (7)
            
            
            —
            
            
            $
            51,500Stephen
      Hicks (5)
            
            
            —
            
            
            $
            5,000
            (5)
            
            
            —
            
            
            $
            5,000Henry
      Sargent (5)
            
            
            —
            
            
            $
            5,000
            (5)
            
            
            —
            
            
            $
            5,000







11









(1)
            Director
      fees include all fees earned for director services including an annual
      retainer and committee chairman fees, to the extent
      applicable.


(2)
            The
      fair value of the stock award was estimated in accordance with FAS
      123R.


(3)
            Dr.
      Curtis joined the Board of Directors on January 14, 2008. He received
      20,000 shares of Technest Common Stock upon his election, which shall vest
      12 months from the date of grant, having a fair value of $9,000 and 24,915
      shares for his services for the 2008 fiscal year having a fair value of
      $11,411.


(4)
            On
      August 9, 2007, Darlene Deptula-Hicks resigned as a director of Technest
      Holdings, Inc. for personal reasons.  Ms. Deptula-Hicks served
      as the chairperson of the Audit Committee and the Nominating and Corporate
      Governance Committee.


(5)
            Messrs.
      Ditkoff, Hicks and Sargent joined the Board of Directors on March 11,
      2008. They each received 10,917 shares of Technest Common Stock as
      compensation for their services for the fourth quarter of the 2008 fiscal
      year, having a fair value of
$5,000.


(6)
            On
      January 21, 2008, Mr. Doto resigned as a director of Technest Holdings,
      Inc. due to his ongoing consulting relationship with E-OIR Technologies (a
      former wholly-owned subsidiary of Technest Holdings, Inc.) and as a result
      of the sale of EOIR to EOIR Holdings,
LLC.


(7)
            General
      Gust chairs the Compensation Committee. He received 20,000 shares of
      Technest Common Stock in January 2008, which shall vest 12 months from the
      date of grant, having a fair value of $9,000 and 38,210 shares of Common
      Stock for his services for the third and fourth quarter of the 2008 fiscal
      year, having a fair value of
$17,500.





Director Fees and Stock
Awards. For the first three quarters of the 2008 fiscal year, our
directors who were not employees of Technest, received compensation for their
services as directors in the form of an annual retainer of $40,000, payable in
quarterly installments, plus reimbursement for travel expenses and non-employee
directors who served as the chairperson of a committee of the Board of Directors
an additional $10,000 per year, except for the Nominating and Corporate
Governance Committee. Beginning in the fourth quarter of the 2008 fiscal year,
our non-employee directors are to be paid $20,000 per year as compensation for
their services paid in Technest Common Stock on a quarterly basis; the number of
shares to be issued is determined by using the average closing price for the
last five trading days of the respective quarter. Directors who are also our
employees receive no additional compensation for serving as
directors.




Equity
Compensation Plan Information





The
following table provides information about the securities authorized for
issuance under the Company's equity compensation plans as of June 30,
2008:








Plan
      category
            
            Number
      of securities to
              be
      issued upon exercise
              of
      outstanding options,
              warrants
      and rights
            
            
            Weighted
      average
              exercise
      price of
              outstanding
      options,
              warrants
      and rights
            
            
            Number
      of
              securities
      remaining
              available
      for future
              issuance(a)
            
            
            (b)
            
            
            (c)Equity
      compensation plans approved by security holders (1)
            
            
            0
            
            
            $
            0
            
            
            
            10,000,000Equity
      compensation plans not approved by security holders (2)
            
            
            (2
            )
            
            
            
            
            
            
            443,221
            (2)Total
            
            
            (2
            )
            
            $
            0
            
            
            
            10,443,221
            (2)






(1)
            2001
      Stock Option Plan.





(2)
            On
      March 13, 2006, Technest adopted the Technest Holdings, Inc. 2006 Stock
      Award Plan, pursuant to which Technest may award up to 1,000,000 shares of
      its common stock to employees, officers, directors, consultants and
      advisors to Technest and its subsidiaries.  The purpose of this
      plan is to secure for Technest and its shareholders the benefits arising
      from capital stock ownership by employees, officers and directors of, and
      consultants or advisors to, Technest and its subsidiaries who are expected
      to contribute to the Company’s future growth and
      success.  Technest has broad discretion in making grants under
      the Plan and may make grants subject to such terms and conditions as
      determined by the board of directors or the committee appointed by the
      board of directors to administer the Plan.  Stock awards under
      the Plan will be subject to the terms and conditions, including any
      applicable purchase price and any provisions pursuant to which the stock
      may be forfeited, set forth in the document making the
      award.  As of June 30, 2008, the Company has 443,221 shares
      available for issuance under the Plan.





12







ITEM
      11.
            SECURITY
      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
      STOCKHOLDER MATTERS




The
following tables set forth information regarding the beneficial ownership of our
common stock as of October 15, 2008 by:




-
            each
      of our directors and officers;-
            each
      person (including any group) who is known by us to own beneficially 5% or
      more of our common stock; and-
            all
      current directors and executive officers as a
  group.




Beneficial
ownership is determined in accordance with the rules of the SEC. In computing
the number of shares beneficially owned by a person and the percentage ownership
of that person, shares of Common Stock subject to options warrants and any other
type of convertible securities held by that person that are currently
exercisable or exercisable within 60 days of October 15, 2008, are deemed issued
and outstanding. These shares, however, are not deemed outstanding for purposes
of computing percentage ownership of each other stockholder. Percentage of
ownership is based on 20,676,739 shares of common stock outstanding on October
15, 2008.




Except as
indicated in the footnotes to this table, each stockholder named in the table
has sole voting and investment power with respect to the shares shown as
beneficially owned by them. Unless otherwise noted below, the address of the
beneficial owners is Technest Holdings, Inc., 10411 Motor City Drive, Suite 650,
Bethesda, Maryland 20817.




Beneficial Owner of 5%
      or more
            
            Number
      of Shares
              Beneficially
      OwnedShares
            
            
            PercentSouthridge
      Partners LP
              90
      Grove Street
              Ridgefield,
      CT 06877
            
            
            10,510,030
            (1)
            
            
            50.83
            %
      (1)Aberdeen
      Avenue LLC
              Cayside,
      2nd Floor Georgetown,
              Grand
      Cayman, Cayman Islands, British West Indies
            
            
            1,416,101
            (2)
            
            
            6.85
            %
      (2)Southshore
      Capital Fund Ltd.
              90
      Grove Street
              Ridgefield,
      CT 06877
            
            
            977,741
            (3)
            
            
            4.73
            %
      (3)Directors and
      Executive OfficersGino
      M. Pereira, Chief Executive Officer, President and
Director
            
            
            447,000
            
            
            
            2.16
            %Nitin
      V. Kotak, Chief Financial Officer
            
            
            50,000
            
            
            
            *Joseph
      P. Mackin, Former Chief Executive Officer, President and
      Director
            
            
            23,913
            (4)
            
            
            *Robert
      A. Curtis, Director
            
            
            44,915
            (5)
            
            
            *Laurence
      Ditkoff, Director
            
            
            10,917
            
            
            
            *David
      R. Gust, Director
            
            
            78,210
            (5)
            
            
            *Stephen
      Hicks, Director
            
            
            10,520,947
            (6)
            
            
            *Henry
      Sargent, Director
            
            
            201,503
            (7)
            
            
            *All
      Current Directors and Executive Officers as a Group (6
      Persons)
            
            
            11,353,509
            (6)(7)
            
            
            54.9
            %
      (6)(7)










13










*Less
than 1%




(1)
Southridge is the holder of 344,827 shares of Series C Convertible Preferred
Stock that are convertible into 344,827 shares of common stock.  The
Technest Series C Preferred Stock can be converted only to the extent that the
Series C stockholder will not, as a result of the conversion, hold in excess of
4.999% of the total outstanding shares of our common stock.  The
Series C stockholder may elect to waive this restriction, but such a waiver
shall not be effective until the 65th day after which it is given to
us.  In no event can the Series C Preferred Stock be converted if such
conversion will result in the holder will hold in excess of 9.999% of our common
stock.  Therefore, the shares issuable upon conversion of the Series C
Convertible Preferred Stock were not included in the table.




Stephen
Hicks has voting and investment control over the securities held by Southridge
Partners, LP and disclaims beneficial ownership of such shares.




In October 2008, Technest has entered into an arrangement with
Southridge Partners, LP for the sale of a newly authorized class of preferred
stock (“Series D Preferred”).  The arrangement permits Technest to sell to
Southridge shares of Series D Preferred for gross proceeds totaling
$1,500,000.  The Series D Preferred has a total face value of
$3,000,000, is convertible into common stock at any time at a price of $0.20 per
share and shall be redeemed by the Company upon receipt of the contingent
purchase price of the sale of EOIR Technologies, Inc.







(2) David
Sims has voting and investment control over the securities held by Aberdeen
Avenue LLC and disclaims beneficial ownership of such shares.




(3)
Southshore is the holder of 57,467 shares of Series C Convertible Preferred
Stock that are convertible into 57,467 shares of common stock The Technest
Series C Preferred Stock can be converted only to the extent that the Series C
stockholder will not, as a result of the conversion, hold in excess of 4.999% of
the total outstanding shares of our common stock.  The Series C
stockholder may elect to waive this restriction, but such a waiver shall not be
effective until the 65th day after which it is given to us.  In no
event can the Series C Preferred Stock be converted if such conversion will
result in the holder will hold in excess of 9.999% of our common
stock.  Therefore, the shares issuable upon conversion of the Series C
Convertible Preferred Stock were not included in the table.




David
Sims has voting and investment control over the securities held by Southshore
Capital Fund Ltd.


and
disclaims beneficial ownership of such shares.




(4) On
December 31, 2007, in conjunction with the closing of the sale of EOIR
Technologies, Inc. to EOIR Holdings, LLC, Dr. Mackin resigned as the Chief
Executive Officer, President and Chairman of the Board of
Directors.




(5)
Includes 20,000 shares of Common Stock that were granted in January 2008 and
vest 12 months from the grant date.




(6)
Includes 10,510,030 shares of Common Stock owned by Southridge Partners, LP for
which Mr. Hicks has voting and investment control.




(7)
Includes 190,603 shares of Common Stock owned by Mountain West Partners LLC, for
which Mr. Sargent is the managing member.







14





ITEM
12.          CERTAIN RELATIONSHIPS
AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE






Southridge
Partners LP





On August
31, 2007, Technest entered into a Release Agreement with Southridge Partners,
LP, a Delaware limited partnership, a current stockholder of the Company,
pursuant to which the parties agreed, among other things, to the
following:





Termination of Certain Sections of
Stockholder Agreement and of License Agreement.


Technest
and Markland Technologies, Inc. (“Markland”) were parties to a Stockholder
Agreement, dated March 13, 2006 (the “Stockholder Agreement”), and a License
Agreement dated March 13, 2006 (the “License Agreement”).  Pursuant to
that an Assignment and Assumption Agreement dated as of August 30, 2007 between
Markland and Southridge, Markland assigned all of its rights in the Stockholder
Agreement and the License Agreement to Southridge. As part of the Release
Agreement, Southridge and Technest agreed to (a) terminate the obligations set
forth in Section 1 of the Stockholder Agreement that restrict the ability of
Technest to issue equity securities, convertible debt or derivative securities,
(b) terminate the obligations set forth in Section 5 of the Stockholder
Agreement relating to a right of co-sale and (c) terminate the License Agreement
in its entirety.  All rights, title and interest in the intellectual
property that was subject to the License Agreement revert back to Technest and
its subsidiaries.





Voting Agreement. Southridge
agreed that it will vote all shares of Technest common stock owned by it and to
cause its affiliates that own shares of Technest common stock or Technest
Preferred Stock to vote all of their shares, in favor of certain transactions
entered into by September 10, 2007 that are approved and recommended by a
majority of the directors of Technest under certain conditions.





Board Representation.The
Board of Directors of Technest agreed to increase the size of the board from
five to six and fix the number of directors of Technest at six and to elect two
reasonably qualified individuals representing Southridge to fill the newly
created directorships in accordance with Technest’s Bylaws.





Other Terms.Until
March 31, 2008 or upon the satisfaction of certain conditions, whichever is
earlier, Technest agreed that it would refrain from (a) issuing any shares of
its common stock or securities convertible into its common stock, other than (i)
shares to be issued in certain permissible offerings; (ii) certain shares
already awarded under Technest’s 2006 Stock Award Plan, and (iii) 250,000 shares
to be issued under the 2006 Stock Award Plan; (b) entering into any transaction
with its officers, directors, stockholders or any of their Affiliates, except
for transactions that are in the ordinary course of Technest’s business, upon
fair and reasonable terms that are no less favorable to Technest than would be
obtained in an arm’s length transaction with a non-Affiliated person or
entity.





The above
description summarizes the material terms of the Release Agreement, which was
filed as exhibit 10.1 to a current report on Form 8-K filed with the SEC on
September 7, 2007 and is incorporated by reference herein. For further
information on the Release Agreement, please refer to exhibit 10.1.





As
consideration for the Release Agreement, Technest agreed to issue Southridge
3,000,000 shares of Technest common stock, $0.001 par value per share. The
issuance of these securities was not registered under the Securities Act of
1933, as amended, but was made in reliance upon the exemptions from the
registration requirements of the Securities Act set forth in Section 4(2)
thereof.





In
addition, during the year ended June 30, 2008, Technest paid Southridge Partners
LP $250,000 in satisfaction of a payable assigned from Markland Technologies,
Inc. in June 2007.





In
October 2008, Technest has entered into an arrangement with Southridge Partners,
LP for the sale of a newly authorized class of preferred stock (“Series D
Preferred”).  The arrangement permits Technest to sell to Southridge shares
of Series D Preferred for gross proceeds totaling $1,500,000.  The
Series D Preferred has a total face value of $3,000,000, is convertible into
common stock at any time at a price of $0.20 per share and shall be redeemed by
the Company upon receipt of the contingent purchase price of the sale of EOIR
Technologies, Inc.








15








Director
Independence





Independence.For the fiscal
year ended June 30, 2008, our Board of Directors determined that two of the six
directors- Robert A. Curtis and David R. Gust, were independent directors as
defined by the NASDAQ Rule 4200(a)(15) governing the independence of directors.
Mr. Robert Doto and Ms. Darlene Deptula-Hicks, two independent directors,
resigned during the fiscal year ended June 30, 2008.




Committees.  Prior
to the resignation of Mr. Doto and Ms Deptula-Hicks, our Board of Directors had
three standing committees that were created in March 2006: Audit Committee,
Compensation Committee and Nominating and Corporate Governance Committee. All
three of our independent directors, Mr. Doto, Ms. Deptula-Hicks, and General
Gust served on each committee. Ms. Deptula-Hicks chaired the Audit Committee and
the Nominating and Corporate Governance Committee and General Gust chaired the
Compensation Committee. Currently, with Mr. Doto and Ms. Deptula-Hicks’
resignations, we have vacancies on the Compensation Committee and the Nominating
and Corporate Governance Committee which we plan to fill shortly. Our Board of
Directors had determined that Ms. Darlene M. Deptula-Hicks qualified as an audit
committee financial expert under the rules of the SEC. She was also the
chairperson of the Audit Committee.  Upon Ms. Depula-Hicks’
resignation on August 9, 2007, Technest no longer had an audit committee
financial expert. Until such time as another independent director, who also
qualifies as an audit committee financial expert, is elected to Board of
Directors, the Audit Committee has been disbanded and the full Board of
Directors serves the functions of the Audit Committee.





Our Compensation
Committee is responsible for establishing cash compensation policies with
respect to our executive officers, key employees and directors, determining the
compensation to be paid to our executive officers and administering our stock
award plan.




Our
Nominating and Governance Committee identifies individuals qualified to become
Board members and recommends to the Board the director nominees for the next
annual meeting of shareholders and candidates to fill vacancies on the Board.
Additionally, the Committee recommends to the Board the directors to be
appointed to Board committees. The Committee also develops and recommends to the
Board a set of corporate governance guidelines applicable to the Board and to
the Company and oversees the effectiveness of our corporate governance in
accordance with those guidelines.














16





ITEM
13.         
EXHIBITS




Item 13
of the Original Filing is hereby amended solely to add the following exhibits
required to be filed in connection with this Amendment no.1 to the Annual Report
on Form 10-KSB/A.




Exhibit
      No.
            Description31.1
            Certification
      by CEO of Periodic Report Pursuant to Rule 13a-14(a) or Rule
      15d-14(a).*31.2
            Certification
      by CFO of Periodic Report Pursuant to Rule 13a-14(a) or Rule 15d-14(a).
      *32.1
            Certification
      by CEO and CFO of Periodic Report Pursuant to 18 U.S.C. Section 1350.
      *


* Filed
herewith.




ITEM
14.          PRINCIPAL ACCOUNTANT
FEES AND SERVICES




Fees
and Services





Audit Fees.The
aggregate audit fees billed for professional services rendered by the
independent registered public accounting firm for the audit of our financial
statements as of and for the years ended June 30, 2008 and 2007, the reviews of
the financial statements in our Form 10-QSB filings for the respective
years, our filings with the Securities and Exchange Commission and other audit
fees were $126,000 and $211,000, respectively.




Audit Related Fees.The aggregate audit related fees billed for professional services by the
independent registered public accounting firm as of and for the years ended June
30, 2008 and June 30, 2007 were $16,050 and $29,375, respectively.  In
the year ended June 30, 2008, the audit related fees primarily include
assistance with the sale of EOIR Technologies, Inc. In the year ended June 30,
2007, the audit related fees include services rendered for issuing and assisting
with SEC comment responses.




Tax Fees.The
aggregate tax fees billed for professional services by the independent
registered public accounting firm as of and for the years ended June 30, 2008
and 2007 were $14,025 and $27,750, respectively.  The tax fees for
both periods include fees for the preparation of federal and state income tax
returns, assistance with IRC Section 382 analysis as well as due diligence
assistance with the EOIR transaction.




All Other Fees.No other fees were billed by or paid to the independent registered public
accounting firm during the years ended June 30, 2008 or 2007.




Our Audit
Committee was created in March 2006.  Other than the services
discussed above, Wolf & Company, P.C. has not rendered any non-audit related
services for the period ended June 30, 2008.  For the year ended June
30, 2008, our Audit Committee approved the audit or non-audit services before
the accounting firm was engaged to perform any such
services.  Management must obtain the specific prior approval of the
Audit Committee for each engagement of the independent registered public
accounting firm to perform any audit-related or other non-audit
services.  The Audit Committee does not delegate its responsibility to
approve services performed by the independent registered public accounting firm
to any member of management.




On August
9, 2007, Darlene Deptula-Hicks resigned as a director of Technest for personal
reasons.  Ms. Deptula-Hicks served as the chairperson of the Company’s
Audit Committee.  Until such time as another independent director, who
also qualifies as an audit committee financial expert, is elected to Board of
Directors, the Audit Committee has been disbanded and the full Board of
Directors is serving the function of the Audit Committee.





17





Signatures






In
accordance with Section 13 or 15(d) of the Exchange Act, the Registrant caused
this Amendment no. 1 to the Annual Report to be signed on its behalf by the
undersigned, thereunto duly authorized on October 28, 2008.







TECHNEST
      HOLDINGS, INC.
              
              By: /s/ Gino
      M.
      Pereira
              Gino
      M. Pereira
              Chief
      Executive Officer












In
accordance with the Exchange Act, this Amendment no. 1 to the Annual Report has
been signed below by the following persons on behalf of the Registrant and in
the capacities and on the dates indicated.








Signature
            
            Title
            
            Date/s/
      Gino Miguel Pereira
            
            Chief
      Executive Officer, President and
            
            October
      28,  2008Gino
      Miguel Pereira
            
            Chairman
      of the Board of Directors/s/
      Nitin V. Kotak
            
            Chief
      Financial Officer and Principal
            
            October
      28, 2008Nitin
      V. Kotak
            
            Accounting
      Officer/s/
      Robert Curtis
            
            Director
            
            October
      28, 2008Robert
      Curtis/s/
      Lawrence Ditkoff
            
            Director
            
            October
      28, 2008Lawrence
      Ditkoff/s/
      David R. Gust
            
            Director
            
            October
      28, 2008David
      R. Gust/s/
      Stephen Hicks
            
            Director
            
            October
      28, 2008Stephen
      Hicks/s/
      Henry Sargent
            
            Director
            
            October
      28, 2008Henry
      Sargent



















18





EXHIBIT
INDEX








Exhibit
      No.
            Description31.1
            Certification
      by CEO of Periodic Report Pursuant to Rule 13a-14(a) or Rule
      15d-14(a).*31.2
            Certification
      by CFO of Periodic Report Pursuant to Rule 13a-14(a) or Rule 15d-14(a).
      *32.1
            Certification
      by CEO and CFO of Periodic Report Pursuant to 18 U.S.C. Section 1350.
      *


* Filed
herewith.















19