Xybernaut Reports Revenue Increase for Both Current Quarter and Year-to-Date

Business Wire, Nov 9, 2004

FAIRFAX, Va. -- Third Quarter Revenue Increases 20% Over Previous Year; Nine-Month Revenue Increases 51% and Surpasses Previous Annual Record

Xybernaut(R) Corporation (NASDAQ:XYBR) today announced results for its third quarter ended September 30, 2004. Total revenue for the third quarter of 2004 was $3.2 million, a 20% increase from the comparable 2003 period. Total revenue for the nine months ended September 30, 2004 was $11.0 million, a 51% increase from the nine months ended September 30, 2003.

Other financial highlights for the three months ended September 30, 2004 include:

--Licensing revenue from the non-exclusive grant of one of the Company's "Dual-Use Flat Panel Display" patents;

--Shipments of Atigo T systems to Tesco pursuant to the Company's recently announced $9 million order; and

--Beginning with the fourth quarter of 2003 and continuing through the third quarter of 2004, the Company has now reported its highest four quarterly revenues ever

"We are well on our way to our most successful year ever. In fact, our total nine-month revenues have already surpassed our previous 12-month high," stated Edward G. Newman, chairman and CEO of Xybernaut. "This top-line growth is the direct result of our continued and successful efforts to bring in new and larger customers while still maintaining our focus on existing partners. With our recently announced management team and enhanced corporate governance initiatives in place, I firmly believe that we are poised to continue to deliver positive results through the rest of 2004, 2005 and beyond."

XYBERNAUT CORPORATION
                 CONDENSED CONSOLIDATED BALANCE SHEETS

                                            (Unaudited)
                                           September 30, December 31,
                                               2004          2003
                                           ------------- -------------
   ASSETS
Current assets:
    Cash and cash equivalents                $6,007,537    $9,524,541
    Restricted cash                             706,750     1,257,554
    Accounts receivable, net of allowances
     of $533,436 and $557,679                 3,203,146     4,883,899
    Inventory, net of reserves of
     $3,272,716 and $3,272,716                2,637,345     2,131,436
    Prepaid and other current assets          2,409,136       984,425
                                           ------------- -------------
        Total current assets                 14,963,914    18,781,855
                                           ------------- -------------
Long-term assets:
    Property, equipment and demonstration
     units, net                                 650,721       382,792
    Patent costs, net of accumulated
     amortization of $2,303,101 and
     $1,963,971                                 914,798       945,126
    Other                                       540,080       710,294
                                           ------------- -------------
        Total long-term assets                2,105,599     2,038,212
                                           ------------- -------------
            Total assets                    $17,069,513   $20,820,067
                                           ============= =============

   LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
    Current liabilities:
        Accounts payable                     $2,469,693    $3,068,374
        Accrued expenses and other            1,513,905     1,283,200
        Deferred revenue                        230,379       332,884
                                           ------------- -------------
              Total current liabilities       4,213,977     4,684,458
                                           ------------- -------------
    Long-term liabilities:
        Restructuring liability                  13,610        62,330
        Deferred revenue                        320,167       163,754
                                           ------------- -------------
              Total long-term liabilities       333,777       226,084
                                           ------------- -------------
           Total liabilities                 $4,547,754    $4,910,542
                                           ------------- -------------

Minority Interest                              $392,799            $-

Commitments and contingencies
Stockholders' equity:
    Common stock, $0.01 par value,
     200,000,000 shares authorized,
     179,191,042 and 172,358,223 shares
     issued and outstanding                   1,791,910     1,723,582
    Additional paid-in capital              171,993,118   163,362,829
    Foreign currency translation                448,893       430,502
    Accumulated deficit                    (162,104,961) (149,607,388)
                                           ------------- -------------
            Total stockholders' equity      $12,128,960   $15,909,525
                                           ------------- -------------
            Total liabilities and
             stockholders' equity           $17,069,513   $20,820,067
                                           ============= =============


                         XYBERNAUT CORPORATION
            CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                              (UNAUDITED)

                    Three Months Ended         Nine Months Ended
                       September 30,              September 30,
                 ------------------------- ---------------------------
                     2004         2003          2004          2003
                 ------------ ------------ ------------- -------------
Revenue:
 Hardware         $1,587,442   $1,621,532    $6,453,475    $4,222,036
 Consulting,
  licensing and
  other            1,657,400    1,081,589     4,566,412     3,056,643
                 ------------ ------------ ------------- -------------
 Total revenue     3,244,842    2,703,121    11,019,887     7,278,679
Cost of sales:
 Hardware          1,461,584    1,302,490     5,917,636     3,124,741
 Consulting,
  licensing and
  other              893,562      690,998     2,547,216     1,920,859
 Provision for
  inventory and
  tooling                  -    1,500,000             -     3,249,354
                 ------------ ------------ ------------- -------------
   Gross income
    / (loss)         889,696     (790,367)    2,555,035    (1,016,275)
Operating
  expenses:
 Sales and
  marketing        3,516,368    2,058,762     9,449,880     6,199,691
 General and
  administrative   1,250,291    1,042,583     3,205,126     3,023,217
 Research and
  development        789,197      708,520     2,742,298     2,708,848
                 ------------ ------------ ------------- -------------
   Total
    operating
    expenses       5,555,856    3,809,865    15,397,304    11,931,756
                 ------------ ------------ ------------- -------------
   Operating
    loss          (4,666,160)  (4,600,232)  (12,842,269)  (12,948,031)
Interest and
 other income /
 (expense), net       20,244      (74,007)       86,828      (361,552)
                 ------------ ------------ ------------- -------------
   Loss before
    minority
    interest      (4,645,916)  (4,674,239)  (12,755,441)  (13,309,583)
Minority interest    103,690            -       257,868             -
                 ------------ ------------ ------------- -------------
   Net loss      $(4,542,226) $(4,674,239) $(12,497,573) $(13,309,583)
                 ============ ============ ============= =============
   Net loss per
    share (basic
    and diluted)      $(0.03)      $(0.03)       $(0.07)       $(0.10)
                 ============ ============ ============= =============
   Weighted
    average
    number of
    shares
    outstanding
    (basic and
    diluted)     179,160,879  158,635,685   176,637,760   138,485,139
                 ============ ============ ============= =============