Xybernaut (XYBRQ) 8-K Regulation FD Disclosure

Exhibit 99.1

IN THE UNITED STATES BANKRUPTCY COURT
FOR THE EASTERN DISTRICT OF VIRGINIA
ALEXANDRIA DIVISION

In re:		)	Case No. 05-12801 RGM
		)	Jointly Administered
		)
XYBERNAUT CORPORATION, et al.,		)	Chapter 11
		)
	Debtors.	)
MONTHLY OPERATING REPORT			Calendar Month12/01/05 to12/31/05

FINANCIAL BACKGROUND INFORMATION

     1. ACCOUNTING BASIS: Cash          Accrual    x    

     2. PREPARER: State the names address, telephone number and position of the person(s) who actually compiled the information contained in this report.

     Nancy Hogan, Xybernaut Corp. 12701 Fair Lakes Circle, Suite 550, Fairfax, VA 22033

     3. NUMBER OF EMPLOYEES paid during this period: 16

     4. Have there been any CHANGES IN THE NATURE OF YOUR BUSINESS since the last reporting period? Yes     No  X  . If yes, explain below:

     5. Are all BUSINESS LICENSES current? Yes  x  No     Not Applicable     

     6. PRE-PETITION ACCOUNTS RECEIVABLE:

Beginning Balance	$	128,780.68
Collected this Period		3,784.56
Ending Balance	$	124,986.12

     7. POST -PETITION ACCOUNTS RECEIVABLE:

          0-30 Days:$ 57,804.05       31-60 Days:$ 27,364.11       Over 60 Days: $76,841.31

     If there are anypost-petition Accounts Receivable over 60 days provide Schedule AR giving a listing of such accounts and explain the delinquencies.

Zygo Industries	$	4,470.	unpaid invoice last of 3 payments due – expect payment
Edison Material	$	120	inv for $5242 pd $5122, balance shipping – contacting client for balance
Walt Disney	$	700	unpaid balance inv $136,228.71 pd 135,528.71 contacting client /balance
GSA	$	6,527.68	Contacted Gen Serv. Admin payment expected
Beijing Novog	$	5,779.90	Contacting client for payment
Caterpillar	$	875.31	unpaid balance in 70,023.44 pd 69,148.13 checking with client
CSX	$	11,815	resubmitted invoices — payment expected
Edison Material	$	372.50	contacted client – expect payment Dec.
FEMA	$	400.00	government prompt payment discount
Super Sonic	$	20	bank fee – write off in Jan
Norwegian	$	45.75	bank fee – applied to wire payment
Xperience	$	45,558.83	Negotiated terms with client – rec’v partial payment, mtg w/client in Jan.
TekGear	$	156.40	unpaid balance on inv original amount due 2074.70 – checking with client

8.	POST –PETITION ACCOUNTS PAYABLE:
	0-30 Days:$ 91,121.17    31-60 Days:$ 16,359.39    Over 60 Days:$ 21,097
	If there are anypost-petition Accounts Payable over 30 days, provide Schedule AP giving a listing of such accounts and explain the delinquencies.
	James Ralabate $ 7,097.00 – Disputed Xperience $ 4,000.00 – offset against outstanding receivables Cabinet BeauD $498.39 invoice dated 11/16 did not receive until late Dec, paid .Dilenschneider $15,000 – in discussion with vendor – pd in Jan Hyatt Plaza $10,000 – negotiated rent payment – will remove in Jan. You Me Patent $861.oo – foreign account received invoice late – pd in Jan
a.	TAXES. Are all taxes being paid to the proper taxing authorities when due? Yes ___No ___x___ . On the attached IRS Form 6123 report all tax deposits made with any financial institution for federal employment taxes. Be sure the form is complete and signed by an authorized employee of the receiving institution or taxing authority. Attach to this report a completed Form 6123 for each deposit made during the reporting period. Also attach copies of the monthly sales tax report, payroll tax report and unemployment tax report with evidence of payment ofboth federal and state taxes.

NOTE: Due to the resignation of Grant Thornton, the Xybernaut Corporation’s auditors and federal/state tax preparers along with the accounting staff and company CFO the year end tax returns have been delayed. Xybernaut will be submitting the required returns in a timely manner. No or little tax liability is expected due to the large NOL carry forward.

     9. ESCROW ACCOUNTS. Are you utilizing your tax account only for deposit and payment of payroll and sales taxes? Yes ___x___ No     If no, explain:                         

     10. Are all BOOKS AND RECORDS of the debtor(s) being maintained monthly and are all current? Yes ___X___ No     Explain:

NOTE: The accounting staff of XC had left the company by April 2005 at which time no monthly close for 2005 had been performed and in July 2005 the CFO resigned, all books and records are being maintained however there maybe updates / corrections over the next couple of months.

     11. INSURANCE EXPIRATION STATEMENT. Policy expiration dates are:

Auto & Truck		73256759	03/31/05	03/31/06
Liability		392595	03/31/05	03/31/06
Workers Comp.		1714215	03/31/05	03/31/06
Errors & Omissions		35392595	03/31/05	03/31/06
D&O	ELU08861005		04/14/05	04/14/06
D&O		35529D0205	04/14/05	04/14/06
D&O	35389095BAL		03/31/05	03/31/06

     12. ACTIONS OF DEBTOR. During the last month, did the debtor:

(A) Fail to defend or not oppose any action seeking to dispossess the debtor from control or custody of any asset of the estate? Yes ___No ___x___ Explain:                         

(B) Maintain such stock inventory, raw materials, insurance, employees and other resources as are necessary to preserve and maintain the going concern value of the assets of the debtor? Yes ___x___ No     Explain:                         

     13. TRANSFER OR SALE OF PROPERTY. Did the debtor or any person with control over any of the debtor’s assets transfer, convey or abandon any of the debtor’s assets to another party during the period of this report other than as set forth herein (including sales by creditors)?

     Yes.     No ___x___ Explain____________

     14. PAYMENT TO SECURED CREDITORS during reporting period: (Attach additional sheets if necessary) N/A

Creditor	Frequency of	Amount	Next	Post-Petition
	Payments per	of Each	Payment	Pmts. No Made
	Contract (mo. Qtr)	Payments	Due	No. 1 Amt.

     15. PAYMENTS TO PROFESSIONALS (Attorneys, Accountants, Real Estate Agents, Auctioneers, Appraisers, etc., during reporting period: (Attach additional sheets, if necessary): NONE

Professional Service Amount

     16. QUARTERLY U.S. TRUSTEE FEES paid during reporting period:

$___0

     17. VERIFICATION: I declare under penalty of perjury that the information contained in this monthly operating report (including attached schedules) is true and correct to the best of my knowledge, information and belief.

Dated:January 17, 2006  DEBTOR-IN-POSSESSION
Signature:
Name/Title:	/s/Perry L. Nolen, CEO/President	Xybernaurt Corporation
Address:	4203 Milton Street	12701 Fair Lakes Circle, Suite 550
	Houston, TX 77005	Fairfax, VA 22033
		Phone:703/654-3591

IN THE UNITED STATES BANKRUPTCY COURT
FOR THE EASTERN DISTRICT OF VIRGINIA
ALEXANDRIA DIVISION

In re:	)	Case No. 05-12801 RGM
	)	Jointly Administered
XYBERNAUT CORPORATION, et al.,	)
	)	Chapter 11
Debtors.	)
	)

Cash Disbursements Summary Report

Calendar Month Ending12/31/05

Total Disbursements from Operating Account	(See Note 1)	427,380.42
Total Disbursements from Payroll Account	(See Note 2)	118,079.65
Total Disbursements from Tax Escrow Account	(See Note 3)	0
Total Disbursements from any other Account	(See Note 4)	0
Grand Total Disbursements from all Accounts			545,460.07 (1)

(1) Xybernaut has only 1 bank account for Operations and Payroll – amounts listed separately for information purposes only.

Note 1 — Include in this amount all checks written, wire transfers made from, or any other withdrawal from the general operating account. Exclude only transfers to the debtor-in-possession payroll account, the debtor-in-possession account tax escrow account or other debtor in possession account where the disbursements will be listed on this report.

Note 2 — Include in this amount all checks written, wire transfers made from, or any other withdrawal from the payroll account. Exclude only transfers to the debtor-in-possession operating account, the debtor- in-possession tax escrow account or other debtor-in-possession account where the disbursements will be listed on this report.

Note 3 — Include in this amount all checks written, wire transfers made from, or any other withdrawal from the tax escrow account. Exclude only, transfers to the debtor-in-possession operating account, the debtor-in-possession payroll account or other debtor-in-possession account where the disbursements will be listed on this report.

Note 4 — Include in this amount any other disbursements made by the debtor including (but not limited to) cash paid from a petty cash fund or cash register, amounts paid from any other debtor-in-possession account, and amounts paid from the accounts of others on the debtors behalf (for example disbursements made from a law firm’s escrow account as a result of a sale of property.)

In re:Xybernaut Corporation, et al. Case Number:05-12801 Jointly Administered

Xybernaut Corporation Balance Statement

Xybernaut Corporation
Balance Sheet

	2005
XYBERNAUT CORPORATION	December 31
ASSETS
Current assets:
Cash In Banks		155,564
Petty Cash		300
Restricted Cash		—
Pre Petiton Accounts receivable		124,986
Post Petiton Accounts receivable		162,009
Less AR — Other, Reserve, Contra		(498,522	)
Inventory		2,010,970
Prepaid and other current assets		779,077
DTDF — Japan		680,099
DTDF — GmbH		12,531,302
DTDF — Gmbh R&D		4,820,238
DTDF — China		286,197
DTDF — XSI		(954,514	)
DTDF — Korea		293,924
DTDF — RESERVE		(18,000,000	)
Total current assets				2,391,630
Fixed assets:
Property and equipment		2138344
Less: accumulated depreciation		-1995048
Total fixed assets				143,296
Other assets:
Investment in subsidiaries		605,584
Patents, net		699,710
Trademarks, net		25,284
Tooling, net		—
Other		138,516
Total other assets				1,469,094
TOTAL ASSETS				4,004,020

Case Number 05-12801 (Jointly Administered) Period Ending December 2005 Balance Statement Page 2

	2005
XYBERNAUT CORPORATION	December 31
LIABILITIES AND EQUITY
Post-Petition Liabilities
Accounts Payable		128,578
Accrued DIP Loan Payable		297,246
Accrued restructuring costs
Deferred Product and Warranty Revenue		170,490
Accrued Professional fees		1,215,346
Accrued Purchases		82,858
Salaries/Commissions Payable		185,628
Total Post Petition Liabilities		2,080,145
Pre-Petition Liabilities
Priority Claims		105,810
Secured Debts		—
Unsecured Debt		1,602,130
Accrued expenses		324,415
Total Pre Petition Liabilities		2,032,355
Total liabilities					4,112,500
Stockholders’ equity:
Common stock		1,946,209
Additional paid-in capital		183,745,591
Cumulative translation adjustment		38,695
Accumulated other comprehensive income (XSI)		37,130
Retained earnings, beginning		(171,411,927	)
Current Retained Earnings — Pre Petition		(10,953,998	)
Current Retained Earnings — Post Petition		(3,510,180	)
Total stockholders’ equity					(108,480	)
TOTAL LIABILITIES AND EQUITY					4,004,020
Acrued Other major items:
General – Miscellaneous				$	150,000
Ed & Steve Newman bonus 100,000 shares				$	138,000
Stale Checks				$	39,234
Vacation Accrual				$	60,732
Warranty Reserve				$	75,900

IN THE UNITED STATES BANKRUPTCY COURT
FOR THE EASTERN DISTRICT OF VIRGINIA
ALEXANDRIA DIVISION

In re:	)	Case No. 05-12801 RGM
	)	Jointly Administered
XYBERNAUT CORPORATION, et al.,	)
	)	Chapter 11
Debtors.	)

MONTHLY OPERATING REPORT
INCOME STATEMENT
(Business Debtor, Accrual Basis)
Calendar MonthDecember 1, 2005 to December 31, 2005
(All figures refer to post-petition transactions)

Case Number 05-12801 (Jointly Administered) Period Ending:December 2005 Income Statement Page 1

Xybernaut Corporation
Results of Operations
Ending December 31, 2005
	Current			YTD
	2005			2005
Revenue:
Sales/Income		86,304			976,698
Cost of Sales
Beginning Inventory		2,810,111			14,913,883
Purchase of Inventory / transfers		(204,190	)		(21,526	)
Less ending Inventory		(2,551,215	)		(14,190,566	)
Direct Labor (Gross Salaries)
Purchased Goods and Services		19,825			144,274
Total Cost of Sales		74,531			846,065
Gross profit		11,773			130,633
Operating Expenses
Officer’s Salaries (Gross)		51,667			206,045
Other Employee Salaries (Gross)		135,734			493,052
Taxes (Payroll: Employer’s Share)		5,936			22,946
Employee Benefits (Insurance, Pension Plan, etc.)		22,397			60,582
Advertising					0
Bad Debts					0
Depreciation & Amortization		52,093			283,498
Corporate Meetings / entertainment					1,106
Insurance (Real Estate)					0
Insurance (Other)		44,231			328,506
Interest (Mortgage, Loans, etc.)					0
Leases (other that Rent)					0
Outside Services & Contractors		350,551			1,507,760

Case Number 05-12801 (Jointly Administered) Period Ending December 2005 Income Statement Page 2

Professional Fees (Attorney, Accountant/bankruptcy )	275,191		385,138
Rent and leases	9,296		98,505
Repairs and maintenance	245		3,674
Supplies			0
Taxes (Real Property)	49		90
Taxes (Other)			5,901
Telephone	4,075		24,451
Travel	27,416		109,513
Utilities			0
U.S. Trustee quarterly fee			5,000
			0
Other Operating Expenses			0
			0
Internet / Website	835		35,172
Office expense	2,535		29,900
Postage			410
Printing	25		8,314
Public company expense	605		8,810
Equipment			50
Courier/overnight	380		12,391
Customer support	1,000		3,440
Penalties (1)			3,928
Total Operating Expenses	986,954		3,640,873
Profit/Loss from operations	(975,181	)	(3,510,240	)
Interest income			60
Net Income (Loss)	(975,181	)	(3,510,180	)

NOTE: Accrual basis reporters must attach Cash Reconciliation Reports or a standard Statement of Sources and Uses of Case to this Report.

In re:Xybernaut Corporation, et al. Case Number:05-12801 Jointly Administered

	Cash Reconciliation Report
		Xybernaut			Accrual
		Corporation			Basis
		Calendar Month			December
		Ending			31, 2005
		Operating/
		Payroll Acct			Totals
Beginning Cash Balance (A)						53,354
Net Income						(975,181	)
Non Cash Expenses
Amortization						3,241
Depreciation						13,622
Total						16,864
Cash from Operations (B+C)						(958,317	)
Other Sources (Uses of Cash)
Decrease (Incr) — Accounts Receivable			32,732
Decrease (Incr) — Inventory			258,896
Decrease (Incr) — equipment — computers — Fixed Assets			1,106
Decrease (Incr) — DTDF (Intercompany)			411,216
Decrease (Incr) — Prepaid Other Current Assets			(21,691	)
Decrease (Incr) — Other Assets (PATENTS) net			23,352
Decrease (Incr) — Other Assets (Trademarks) net			2,206
Decrease (Incr) — Other Assets			14,577
Increase (Decr) — Accounts Payable			(32,459	)
Increase (Decr) — Accrued Expenses			(8,614	)
Increase (Decr) — Purchase Accrual			(228,231	)
Increase (Decr) — Accrued P./R Taxes			—
Increase (Decr) — Accrued Prof Fees			259,668
Increase (Decr) — Accrued DIP Loan			297,246
Increase (Decr) — Accrued Rent			—
Increase (Decr) — Accrued Salaries			72,563
Increase (Decr) — Accrued Sales Taxes			—
Increase (Decr) — Deferred Restruturing Cost			—
Increase (Decr) — Deferred product & warranty revenue			(22,926	)
Total Other Sources (uses) of Cash						1,059,641
Ending Cash Balance (F = A+D+E)						154,678
Balance per Bank Statement						155,348
Less Outstanding Checks						21,793
Add Deposits in Transit						21,123
Reconciled Bank Balance [J=(G-H)+I]						154,678

In re:Xybernaut Corporation, et al. Case Number:05-12801 Jointly Administered

CASH RECONCILIATION REPORT
Payroll and Tax Accounts

(Business Debtor, Accrual Basis)
Calendar Month ending:December 2005
(All figures refer to post-petition transactions)

			Payroll		Tax
Amounts shown represent payroll activity for the month of December that occurred in the combined Operating/Payroll acct.			Account		Account
(A) Beginning Cash Balance (A)
Cash Receipts:
Transfers from Operating Account			$	118,079.65
Transfers from Payroll Account
Other —
(B) Total Cash Receipts (B)
(C) Cash Available (C= A+B)
Cash Disbursements:
Gross Payroll for this period	$	130,628.04
Employee Benefits paid			$	6,511.44
Net Payroll Paid			$	76,099.47
Transfers to Tax Account
Taxes deposited or paid during period
Employee’s share of FICA Tax				5,936.04
Employer’s share of FICA Tax				5,936.02
Employee’s Federal Income Tax				18,018.11
Employee’s State Income Tax				4,676.66
Unemployment Tax				618.83
Unrecorded Bank Service Charges				283.08
Other:
(D) Total Disbursements (D)			$	118,079.65
(E) Ending Cash Balance (E= C-D)
(F) Balance per Bank Statement (F)

	Payroll	Tax
Amounts shown represent payroll activity for the month of December that occurred in the combined Operating/Payroll acct.	Account	Account
(G) Less Outstanding Checks (G)
(H) Add Deposits in Transit
(I) Reconciled Bank Balance {I = (F-G) +H]

Ending Cash Balance (E) and Reconciled Bank Balance (I) should equal