SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
___________________________________________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): February 8, 2005
TECHNEST HOLDINGS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
NEVADA 000-27023 88-0357272
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(STATE OR OTHER JURISDICTION (COMMISSION (IRS EMPLOYER
OF INCORPORATION) FILE NUMBER) IDENTIFICATION NUMBER)
90 GROVE STREET, SUITE 205, RIDGEFIELD, CT 06877
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(203) 431-1611
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
N/A
(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
Check the appropriate box below if the form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below).
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act (17 CFR 240.13e-4(c))
CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS
This report on Form 8-K contains "forward-looking statements" within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. We intend the forward-looking statements to be
covered by the safe harbor provisions for forward-looking statements in these
sections. All statements regarding our expected financial position, business and
financing plans are forward-looking statements. These statements can sometimes
be identified by our use of forward-looking words such as "may," "will,"
"should," "expect," "anticipate," "project," "designed," "estimate," "plan" and
"continue." Although we believe that our expectations in such forward-looking
statements are reasonable, we cannot promise that our expectations will turn out
to be correct. These forward-looking statements generally relate to plans and
objectives for future operations and are based upon reasonable estimates and
assumptions regarding future results or trends. These forward-looking statements
are subject to certain risks, uncertainties and assumptions relating to Technest
Holdings, Inc. ("Technest", the "Company", "we" or "our"). Factors that could
cause actual results to differ materially from Technest expectations include the
uncertainty regarding Technest's ability to repay existing indebtedness, lack of
continuing operations, possible inability of Technest to continue in business
and other risks detailed from time to time in Technest's SEC reports. No
assurance can be given that investors of Technest will retain any level of
value. Should one or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, the Company's future performance and
actual results of operations may vary significantly from those anticipated,
projected, believed, expected, intended or implied. The Company undertakes no
obligation to update any of the forward-looking statements, which speak only as
of the date they were made.
ITEM 1.01 ENTRY INTO A DEFINITIVE MATERIAL AGREEMENT
ITEM 1.02 TERMINATION OF A MATERIAL DEFINITIVE AGREEMENT
ITEM 3.02 UNREGISTERED SALES OF EQUITY SECURITIES
ITEM 3.03 MATERIAL MODIFICATION OF RIGHTS OF SECURITY HOLDERS
ITEM 5.03 AMENDMENTS TO ARTICLES OF INCORPORATION
Designation of Series A Preferred Stock
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On February 8, 2005, the Company's board of directors designated 150
shares of preferred stock as Series A Convertible Preferred Stock.
The Company filed a Certificate of Designation for the Series A
Preferred Stock with the Nevada Secretary of State on February 8, 2005. The
Series A Convertible Preferred Stock is non interest bearing, and is not
entitled to receive dividends. Should a liquidation event occur, the Series A
Preferred Stock automatically converts into our Common Stock. The holders of
Series A Preferred Stock will be entitled to vote as a separate class on any
amendment to the terms or authorized number of shares of Series A Preferred
Stock, the issuance of any equity security ranking senior to the Series A
Preferred Stock and the redemption of or the payment of a dividend in respect
of any junior security. At any time, holders of Series A Preferred Stock may
elect to convert their Series A Preferred Stock into common stock. Each share of
Series A Preferred Stock is currently convertible into 1,000,000 shares of
common stock provided that, following such conversion, the total number of
shares of Common Stock then beneficially owned by such holder and its Affiliates
and any other Persons whose beneficial ownership of Common Stock would be
aggregated with the holder's for purposes of Section 13(d) of the Exchange Act,
does not exceed 4.999% of the total number of issued and outstanding shares of
Common Stock. A copy of the Certificate of Designation of the Series A Preferred
Stock is filed as Exhibit 4.1 hereto and incorporated herein by reference.
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The Company currently has 124.325 shares of Series A Convertible
Preferred Stock issued and outstanding.
Securities Purchase Agreement with Verdi Consulting, Inc.
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On February 8, 2005, we entered into a Securities Purchase Agreement
with Verdi Consulting, Inc. pursuant to which we sold twenty five (25) shares of
our Series A Convertible Preferred Stock for the aggregate consideration of
$25,000. We received net proceeds of $25,000 from this private placement.
We intend to use the proceeds from this offering for working capital and to
reduce our debt. The offer and sale of these securities was made in reliance
on Section 4(2) of Securities Act of 1933, as amended (the "Act").
Verdi Consulting, Inc. is an "accredited investor" within the meaning of
Regulation D.
Verdi Consulting is entitled to have the shares of Common Stock
issuable upon conversion of the Series A Shares included in our next
registration statement filed with the Securities and Exchange Commission (the
"SEC"). These piggy-back registration rights expire when the shares of Common
Stock issued pursuant to conversion of the Series A Shares can be sold without
volume restrictions pursuant to Rule 144(k) of the Act.
The Securities Purchase Agreement contains standard representations,
warranties and covenants and is attached to this Current Report as Exhibit 10.1.
The terms of this agreements are incorporated by reference into this current
report on Form 8-K. The certification of designation, which sets forth the terms
and conditions of the Series A Preferred Stock is also incorporated by reference
into this current report on Form 8-K.
THE SECURITIES PURCHASE AGREEMENT AND THE SERIES A CERTIFICATE OF DESIGNATION
HAVE BEEN FILED AS EXHIBITS TO THIS CURRENT REPOT. THESE DOCUMENTS CONTAIN
IMPORTANT INFORMATION. THESE DOCUMENTS ARE PUBLICLY AVAILABLE ON THE SEC WEBSITE
AT WWW.SEC.GOV. WE URGE TO OBTAIN COPIES AND CAREFULLY REVIEW THESE DOCUMENTS
BEFORE MAKING AN INVESTMENT DECISION.
Relationship with Verdi Consulting.
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We issued common stock to Verdi Consulting, Inc. as compensation for
consulting services. These shares of Common Stock were issued in reliance on
Section 4(2) of Securities Act of 1933. Verdi Consulting, Inc., a corporation
wholly owned by Chad Verdi is an "accredited investor" within the meaning of
Regulation D
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Transactions between the Company and Garth LLC.
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On February 8, 2005, we entered into an Exchange Agreement (the
"Exchange Agreement") a Securities Purchase Agreement with Garth LLC pursuant to
which we agreed to issue 99.325 shares of our Series A Preferred Stock in
exchange for $25,000 in cash and the surrender of certain of our 8% Promissory
Notes held by Garth LLC (the "Notes"). As of December 31, 2004, the Notes had an
aggregate outstanding principal balance plus accrued interest of $74,325.
No penalties were paid in connection with the exchange and cancellation of
the Notes. We received net cash proceeds of $25,000 from this private
placement. We intend to use the proceeds from this offering for working
capital and to reduce our debt. The offer and sale of these securities
was made in reliance on Section 4(2) of Securities Act of 1933, as
amended (the "Act"). .
Garth LLC is entitled to have the shares of Common Stock issuable upon
conversion of the Series A Shares included in the next registration statement we
file with the SEC. These piggy-back registration rights expire when the shares
of Common Stock issued pursuant to conversion of the Series A Shares can be sold
without volume restrictions pursuant to Rule 144(k) of the Act.
The Exchange Agreement and the Securities Purchase Agreement contain
standard representations, warranties and covenants and are attached to this
Current Report as Exhibit 10.3 and Exhibit 10.4 respectively.
Relationship with Garth LLC.
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We issued promissory notes to Garth LLC in exchange for cash proceeds
over time to cover our working capital needs. These promissory notes became
due and payable by us on December 31, 2004. We did not have sufficient cash
to repay the notes plus accrued interest. These promissory notes were
issued in reliance on Section 4(2) of the Securities Act of 1933, as amended.
Garth LLC, a Cayman Island limited liability company, is an
"accredited investor" within the meaning of Regulation D and is also a
shareholder of the Company.
A DESCRIPTION OF THE FINANCING IS INCLUDED IN OUR ANNUAL REPORT ON FORM 10-KSB
(FILE NO. 000-27023). COPIES OF THE NOTES ISSUED IN CONNECTION WITH THAT
FINANCING WERE FILED AS EXHIBITS THERETO. THESE FILINGS ARE
PUBLIC DOCUMENTS AVAILABLE ON THE SEC'S WEB SITE AT WWW.SEC.GOV. WE URGE YOU TO
OBTAIN AND READ CAREFULLY COPIES OF THESE DOCUMENTS AND THIS CURRENT REPORT AND
ITS EXHIBITS.
Possible Anti-Takeover Effect
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You should be aware that Issuance of Preferred Stock may, depending on
the terms of such series, make it more difficult or discourage an attempt to
obtain control of the Company by means of a merger, tender offer, proxy contest
or other means. When, in the judgment of the Board of Directors, this action
will be in the best interest of the stockholders and the Company, such shares
could be used to create voting or other impediments or to discourage persons
seeking to gain control of the Company. Such shares also could be privately
placed with purchasers favorable to the Board of Directors in opposing such
action. In addition, the Board of Directors could authorize holders of a series
of Common or Preferred Stock to vote either separately as a class or with the
holders of the Company's Common Stock, on any merger, sale or exchange of assets
by the Company or any other extraordinary corporate transaction. The existence
of the additional authorized shares could have the effect of discouraging
unsolicited takeover attempts. The issuance of new shares also could be used to
dilute the stock ownership of a person or entity seeking to obtain control of
the Company should the Board of Directors consider the action of such entity or
person not to be in the best interest of the stockholders of the Company. The
issuance of new shares also could be used to entrench current management or
deter an attempt to replace the Board of Directors by diluting the number or
rights of shares held by individuals seeking to control the Company by obtaining
a certain number of seats on the Board of Directors.
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ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
INCORPORATED BY REFERENCE
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FILED WITH EXHIBIT
EXHIBIT NO. DESCRIPTION THIS FORM 8-K FORM FILING DATE NO.
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4.1 Series A Convertible Preferred Stock X
Certificate of Designations, filed with
the Secretary of State of Nevada on
February 8, 2005.
10.1 Securities Purchase Agreement between the X
registrant and Verdi Consulting dated
February 8, 2005.
10.2 Form of 8% Promissory Note between the X
registrant and Garth LLC.
10.3 Exchange Agreement between the registrant X
and Garth LLC dated February 8, 2005.
10.4 Securities Purchase Agreement between the X
registrant and Garth LLC dated February 8,
2005.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THECHNEST HOLDINGS, INC.
By: /s/ Mark Allen
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Mark Allen
Director
Date: February 14, 2005
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EXHIBIT INDEX
INCORPORATED BY REFERENCE
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FILED WITH EXHIBIT
EXHIBIT NO. DESCRIPTION THIS FORM 8-K FORM FILING DATE NO.
- ----------- ----------- ------------- ---- ----------- ---
4.1 Series A Convertible Preferred Stock X
Certificate of Designations, filed with
the Secretary of State of Nevada on
February 8, 2005.
10.1 Securities Purchase Agreement between the X
registrant and Verdi Consulting dated
February 8, 2005.
10.2 Form of 8% Promissory Note between the X
registrant and Garth LLC.
10.3 Exchange Agreement between the registrant X
and Garth LLC dated February 8, 2005.
10.4 Securities Purchase Agreement between the X
registrant and Garth LLC dated February 8,
2005.
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