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:	)
XYBERNAUT CORPORATION,	)	Case No. 05-12801 RGM
Debtor.	)	Chapter 11

MONTHLY OPERATING REPORT Calendar MonthOctober 1, 2006 to October 31, 2006

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.

Rebecca Tiffany, Senior Accountant, Xybernaut Corp, 5175 Parkstone Drive,
Ste. 130, Chantilly, VA 20151

3. NUMBER OF EMPLOYEES paid during this period: 9   

4. Has 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    No _X     Not Applicable     

The Company is currently on a monthly payment plan with the County of Fairfax, Virginia for payment of the business license renewal.

6. PRE-PETITION ACCOUNTS RECEIVABLE:

Beginning Balance	$	94,678.31
Collected this Period	$	0.00
Ending Balance	$	94,678.31

7. POST -PETITION ACCOUNTS RECEIVABLE:

0-30 Days:$ 50,526.94 31-60 Days:$177,259.62 Over 60 Days:$ 11,828.20

If there arepost-petition accounts receivable over 60 days, provide a schedule giving a listing of such accounts and explain the delinquencies.

Customer Name	Amount		Comment
Beijing Novog Technology	$	5,779.90	Prompt payment has been requested.
Best Buy	$	320.00	Paid in November
Federal Express	$	1,774.40	Paid in November
Flight Deck Resources	$	100.00	Prompt payment has been requested.
MSGI Security	$	94.90	Short payment of invoice by insufficient funds on
			credit card; account sent to collections.
MSGI Security	$	3,227.00	Insufficient funds on credit card; account sent
			to collections.
Oilstop	$	380.00	Paid in November
Walt Disney World Co.	$	152.00	Prompt payment has been requested.
TOTAL Bal > 60 days	$	11,828.20

8. POST –PETITION ACCOUNTS PAYABLE:

0-30 Days:$ 210,782.34 31-60 Days:$ 110,376.33 Over 60 Days:$ 12,500.00

If there are anypost-petition Accounts Payable over 30 days, provide Schedule AP giving a listing of such accounts and explain the delinquencies.

Payee	Amount		Comment
County of Fairfax	$	11,381.33	Payment plan in place
Dilenshneider Group	$	7,500.00	Disputed
DT Research	$	98,995.00	Not due per terms of agreement, paid in Nov.
Donlin, Recano & Co.	$	5,000.00	Paid in November
TOTAL BAL>30 days	$	122,876.33

9. TAXES. Are all taxes being paid to the proper taxing authorities when due? Yes _X     No     . 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 of both federal and state taxes.

NOTE: Due to limited funding, the debtor had not been able to retain a tax accountant for preparation of both the 2004 and 2005 federal and state tax returns. The Company has now retained a tax accountant and the 2004 tax returns were completed and filed in October 2006. The 2005 federal and state returns were completed, and will be filed in November 2006.

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

11. Are all BOOKS AND RECORDS of the debtor(s) being maintained monthly and are all current? Yes  _X_,   No     If no, explain:

NOTE: Due to lack of review by independent auditors, the Company’s Balance Sheet and Income Statement may require adjustments in the future to conform with generally accepted accounting principles. The Monthly Operating Reports are in a format prescribed by applicable bankruptcy law that is generally consistent, but not in full conformity, with generally accepted accounting principles.

12. INSURANCE EXPIRATION STATEMENT. Policy expiration dates are:

Type	Policy #		Policy Dates
Auto & Truck		73256759		03/31/06 01/31/07
Liability		35392595		03/31/06 01/31/07
Workers Comp.		71714215		03/31/06 01/31/07
Excess/Umbrella Liability		79781303		03/31/06 01/31/07
Errors & Omissions		35392595		03/31/0601/31/07
Crime Policy		81586177		03/31/06 01/31/07
International Coverage		35389095		03/31/0601/31/07

13.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 contro1 or custody of any asset of the estate? Yes     No _X     if yes, 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     if no, explain:

14. 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     if yes, explain:

15. PAYMENT TO SECURED CREDITORS during reporting period:

	Frequency of
	Payments per	Amount of	Each
Creditor	Contract (mo. Qtr)	Payment		Next Payment Due	Post-Petition Pmts. No Made
					No.		Amount
East River Capital, LLC	Monthly fee	$5,000.00 (10/2/06)		11/1/06		1	$	5,000.00

16. PAYMENTS TO PROFESSIONALS (Attorneys, Accountants, Real Estate Agents, Auctioneers, Appraisers, etc., during reporting period:

Professional Service Amount

17. QUARTERLY U.S. TRUSTEE FEES paid during reporting period: $0.00

18. 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:     November 28, 2006     DEBTOR-IN-POSSESSION

Signature:	/s/ Perry L. Nolen	Xybernaut Corporation
Name/Title:	Perry L. Nolen, CEO/President	5175 Parkstone Drive
Address:	5175 Parkstone Drive	Suite 130
	Suite 130	Chantilly, VA 20151
	Chantilly, VA 20151	703-480-0480

1

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

	)
	)
	)
In re:	)
XYBERNAUT CORPORATION,	)	Case No. 05-12801 RGM
Debtor.	)	Chapter 11

Cash Disbursements Summary Report

Calendar Month EndingOctober 31, 2006

Total Disbursements from Operating Account	(See Note 1) $173,703.49
Total Disbursements from Payroll Account	(See Note 2) $102,971.15
Total Disbursements from Tax Escrow Account	(See Note 3) $0.00
Total Disbursements from any other Account	(See Note 4) $0.00
Grand Total Disbursements from all Accounts		$	276,674.64

(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.)

2

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

In re:
XYBERNAUT CORPORATION, Debtor. )
) Case No. 05-12801 RGM
Chapter 11

MONTHLY OPERATING REPORT
BALANCE SHEET
(Business Debtor, Accrual Basis)
As of October 31, 2006

ASSETS
Current assets:
Cash	$	36,788
Petty Cash		55
Restricted cash		—
Pre-petition accounts receivable		94,678
Post-petition accounts receivable		239,614
Less accounts receivable other and reserves		(499,865	)
Inventory		791,575
Prepaid and other current assets		744,772
Due to / due from accounts less reserve		593,496
Due to / due from Xybernaut Solutions Inc.		(1,279,854	)
Total current assets				$	721,259
Fixed assets:
Property and equipment	$	1,875,762
Less: accumulated depreciation		(1,820,649	)
Total fixed assets					55,113
Other assets:
Investment in subsidiaries	$	605,584
Patents, net		536,117
Trademarks, net		8,044
Other		123,947
Total other assets					1,273,692
TOTAL ASSETS				$	2,050,064
LIABILITIES AND EQUITY
Post-Petition Liabilities:
Accounts payable		333,659
Accrued DIP loan payable		2,659,489
Accrued Premium on DIP loan payable		1,797,890
Deferred Product and Warranty Revenue		68,027
Accrued Professional fees		4,847,018
Accrued Purchases		82,858
Salaries/Commissions Payable		93,852
Total Post-petition liabilities				$	9,882,793
Pre-Petition Liabilities:
Priority Claims		105,810
Unsecured Debt		1,588,318
Accrued expenses		197,457
Total Pre-petition liabilities					1,891,585
Total liabilities				$	11,774,378
Shareholders’ equity:
Common stock		1,946,209
Additional paid-in capital		183,745,591
Cumulative translation adjustment		38,695
Accum. 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		(13,126,014	)
Total shareholders’ equity					($9,724,314	)
TOTAL LIABILITIES AND EQUITY				$	2,050,064

3 •

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

In re:
XYBERNAUT CORPORATION, Debtor. )
)
)
Case No. 05-12801 RGM
Chapter 11

MONTHLY OPERATING REPORT
INCOME STATEMENT
(Business Debtor, Accrual Basis)
Calendar MonthOctober 1, 2006 to October 31, 2006
(All figures refer to post-petition transactions)

	Month			Year-to-date 2006
Revenue:
Hardware	$	53,221		$	1,601,746
Services		17,097			266,574
Total revenue	$	70,318		$	1,868,320
Cost of sales:
Beginning inventory	$	1,399,298		$	2,551,215
Purchase of inventory / transfers		22,021			727,934
Less ending inventory		(1,331,819	)		(1,331,819	)
Purchased goods and services		9,811			95,768
Total cost of sales	$	99,311		$	2,043,098
Gross profit		($28,993	)		($174,778	)
Operating expenses:
Officer’s salaries (gross)	$	32,917		$	422,083
Other employee salaries (gross)		64,138			946,252
Employee benefits (insurance, eb plan, taxes)		11,359			184,503
Depreciation & amortization		9,828			331,502
Corporate meetings / entertainment		—			4,670
Insurance		6,046			216,608
Interest (mortgage, loans, etc.)		—			4,553
Premium on DIP loan payable (ERC)		84,168			1,797,890
Interest on DIP loan payable (ERC)		55,843			282,866
Settlement (LC Fund DIP Loan)		—			300,000
Professional fees (attorney, accountant )		70,730			3,772,383
Rent and leases		10,683			128,376
Repairs and maintenance		212			1,345
Supplies, dues & subscriptions		—			6,618
Taxes		9,512			28,322
Telephone		1,752			34,031
Travel		10,575			123,336
U.S. Trustee quarterly fee		3,750			17,500
Internet / website		1,486			20,362
Office expense		2,988			29,117
Postage		—			—
Printing		—			706
Public company expense		1,187			28,519
Equipment		4,608			52,614
Courier/overnight		377			8,769
Customer support		—			1,000
Office move		—			18,721
Total operating expenses	$	382,159		$	8,762,646
Net loss		($411,152	)		($8,937,424	)

NOTE:

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

In re:Xybernaut Corporation Case Number:05-12801

Cash Reconciliation Report

Calendar Month Ending: October 31, 2006

Beginning cash balance (A)	$	16,911
Net loss		(411,152	)
Non cash expenses
Depreciation & amortization		9,828
Cash from Operations					($384,413	)
Other sources (uses of cash)
Decrease (Incr) — Accounts receivable		123,837
Decrease (Incr) — Accounts receivable pre-petition		—
Decrease (Incr) — Inventory		67,478
Decrease (Incr) — Fixed assets		(6,540	)
Decrease (Incr) – DTDF (Intercompany)		(148,769	)
Decrease (Incr) — Prepaid other current assets		5,480
Decrease (Incr) – Funds to escrow		600,000
Decrease (Incr) — Other assets		(7,801	)
Increase (Decr) — Accounts payable		108,368
Increase (Decr) — Accrued expenses		956
Increase (Decr) — Purchase accrual		—
Increase (Decr) — Accrued professional fees		1,739
Increase (Decr) — Accrued DIP loan payable		(409,487	)
Increase (Decr) — Accrued premium on DIP loan payable		84,169
Increase (Decr) — Accrued rent		—
Increase (Decr) — Accrued salaries		(12,747	)
Increase (Decr) — Accrued sales taxes		—
Increase (Decr) — Deferred product & warranty revenue		14,518
Total Other Sources (uses) of Cash				$	421,201
Ending Cash Balance				$	36,788
Balance per Bank Statement				$	107,809
Less Outstanding Checks					(71,021	)
Add Deposits in Transit
Reconciled Bank Balance				$	36,788

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In re:Xybernaut Corporation Case Number:05-12801

CASH RECONCILIATION REPORT
Payroll and Tax Accounts
(Business Debtor, Accrual Basis)
Calendar Month ending:October 2006
(All figures refer to post-petition transactions)

Amounts shown represent payroll activity for the month of September that occurred	Payroll		Tax
in the combined Operating/Payroll acct.	Account		Account
(A) Beginning Cash Balance (A)		—
Cash Receipts:	$	102,971.15		—
Transfers from Operating Account		—		—
Transfers from Payroll Account		—		—
Other — ___________________________________		—		—
(B) Total Cash Receipts (B)		—		—
	$	102,971.15
(C) Cash Available (C= A+B)	$	4,383.41
Cash Disbursements:		—
Gross Payroll for this period $97,544.24	$	65,864.13
Employee Benefits paid	$	4,955.63
Net Payroll Paid		—
Transfers to Tax Account	$	4,955.63
Taxes deposited or paid during period		—		—
Employee’s share of FICA Tax	$	18,239.81		—
Employer’s share of FICA Tax		—		—
Employee’s Federal Income Tax	$	3,976.57		—
Employee’s State Income Tax		—		—
Unemployment Tax	$	0.00		—
Unrecorded Bank Service Charges		—		—
Other: ____________________________	$	595.97		—
(D) Total Disbursements (D)	$	102,971.15		—
(E) Ending Cash Balance (E= C-D)		__$0__________		—
(F) Balance per Bank Statement (F)		__$0__________		—
(G) Less Outstanding Checks (G)		—		—
(H) Add Deposits in Transit		—		—
(I) Reconciled Bank Balance {I = (F-G) +H]		_ $0__________		—

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

5