SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-K/A

[X]      ANNUAL  REPORT  PURSUANT  TO  SECTION  13 OR  15(d)  OF THE  SECURITIES
         EXCHANGE ACT OF 1934

         For the fiscal year ended December 31, 2000

[ ]      TRANSITION  REPORT  PURSUANT  TO SECTION 13 OR 15(d) OF THE  SECURITIES
         EXCHANGE ACT OF 1934

Commission file number 0-21013

                              XYBERNAUT CORPORATION
--------------------------------------------------------------------------------
                 (Name of small business issuer in its charter)

              Delaware                                       54-1799851
--------------------------------               ---------------------------------
(State or other jurisdiction of                         (I.R.S. Employer
incorporation or organization)                         Identification No.)

     12701 Fair Lakes Circle                                    22033
          Fairfax, VA
----------------------------------------       ---------------------------------
(Address of principal executive offices)                     (Zip Code)

Issuer's telephone number, including area code: 703-631-6925

Securities registered under Section 12(b) of the Exchange Act:
                          COMMON STOCK, $.01 PAR VALUE

Securities registered under Section 12(g) of the Exchange Act: _______

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

         Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-K 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-K
or any amendment to this Form 10-K. [ ]

         The aggregate market value at April 25, 2001 of the Common Stock of the
issuer, its only class of voting stock, was $106,605,384, of which $97,268,294
was held by non-affiliates, calculated on the basis of the closing price of such
stock on the National Association of Securities Dealers Automated Quotation
System Small Cap Market on that date. Such market value of non-affiliates
excludes shares owned by all executive officers and directors (but includes
shares owned by their spouses); this should not be construed as indicating that
all such persons are affiliates.

         The number of shares outstanding of the issuer's Common Stock at April
25, 2001 was 47,170,524.

                       DOCUMENTS INCORPORATED BY REFERENCE

                                      None

<PAGE>

                                    PART III

ITEM 10.          DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT


The Company's directors and executive officers are:
<TABLE>
<CAPTION>
                                                                         YEAR FIRST
                                                                         ELECTED OR
         NAME                                    AGE        CLASS        APPOINTED                POSITION
         ----------------------------------- ------------ ---------- ------------------- ----------------------------
<S>                                              <C>                         <C>
         Edward G. Newman                        58          III             1990        President, Chief Executive
                                                                                         Officer and Chairman of the
                                                                                         Board
                                                                                         of Directors
         Steven A. Newman, M.D.                  55          III             1995        Executive Vice President and
         (1)(2)(3)                                                                       Vice Chairman of the Board
                                                                                         of Directors
         John F. Moynahan                        43           -               -          Senior Vice President, Chief
                                                                                         Financial Officer and
                                                                                         Treasurer
         Dr. Edwin Vogt                          68          II             1998         Senior Vice President and
                                                                                         Director
         Kazuyuki Toyosato                       55           I             1998         Executive Vice President
                                                                                         and Director
         Eugene J. Amobi                         57          II             1996         Vice President and Director
         Martin Eric Weisberg, Esq. (1)(3)       50          II             1997         Secretary and Director
         Keith P. Hicks, Esq. (2)                78           I             1994         Director
         Phillip E. Pearce (2)(3)                72          II             1995         Director
         James J. Ralabate, Esq                  73          III            1995         Director
         Lt. Gen. Harry E. Soyster (Ret.)        66          II             1995         Director
         (1)(3)
</TABLE>
-------------------------
(1)  Member of the Compensation Committee.
(2)  Member of the Audit Committee.
(3)  Member of the Nominating Committee.

         Officers are appointed by and serve at the discretion of the Board of
Directors. The Company's Board of Directors is divided into three different
classes. At each annual meeting of stockholders, one class of directors will be
elected for a term of three years to succeed those directors in the class whose
terms then expire. All directors hold office until the third annual meeting of
shareholders following their election or until their successors are elected and
qualified.

<PAGE>

CLASS I DIRECTORS

         Keith P. Hicks, Esq. has been a director since July 1994 and is
currently a principal in C&H Properties and the owner of Hicks Bonding Co.,
Hicks Auctioneering Co. and Hicks Cattle Company. Mr. Hicks is a graduate of the
University of Denver (B.A. 1954) and LaSalle University School of Law (L.L.B.
1969).

         Kazuyuki Toyosato joined the Company in 1996 as Executive Vice
President of Asian Operations. Mr. Toyosato is responsible for overseeing the
Company's operations in Asia, including Japan. Prior to joining the Company, Mr.
Toyosato spent 27 years with Sony Corporation in Japan where his last position
was the Vice President of Sony USA. He previously helped manage the Sony Walkman
product line and Lithium battery business, and managed Sony's 8mm video
camcorder and its peripherals product line.

         Martin Eric Weisberg, Esq. who currently serves as Secretary of the
Company, is a partner of the law firm, Jenkens & Gilchrist Parker Chapin LLP,
which serves as general counsel to the Company. Mr. Weisberg specializes in the
areas of securities, mergers and acquisitions, financing and international
transactions and has been in the private practice of law for 25 years. Mr.
Weisberg is a summa cum laude graduate of Union College (B.A. 1972) and received
his law degree from The Northwestern University School of Law (1975), where he
graduated summa cum laude, was Articles Editor of the Law Review and was elected
to the Order of the Coif. Mr. Weisberg also attended The London School of
Economics and Political Science.

CLASS II DIRECTORS

         Eugene J. Amobi has been a Vice President of the Company since January
2000 and a director of the Company since January 1996. Since 1983, Mr. Amobi has
been President, a director and a principal stockholder of Tech International,
Inc. ("Tech International"), which provides engineering, technical support and
consulting services to government and domestic and international commercial
clients. Mr. Amobi has been president and director of Tech International of
Virginia Inc. ("Tech Virginia"), our wholly-owned subsidiary, since its spin-off
from Tech International. Mr. Amobi also has been president of Tech Consultants
Inc. since 1988. Prior to 1983, Mr. Amobi was a Senior Engineer with E.I. DuPont
de Nemours and a Managing Director of Stanley Consultants, an international
engineering consulting firm. Mr. Amobi is a graduate of The Technion, Israel
Institute of Technology (B.S. 1969), Princeton University (M.S. 1970) and
Syracuse University (M.B.A. 1973).

         Phillip E. Pearce has been a director of the Company since October
1995. Mr. Pearce has been an independent business consultant with Phil E. Pearce
& Associates, Chairman and Director of Financial Express Corporation since 1990
and since 1988 has been a principal of Pearce-Henry Capital Corp. Prior to 1988,
Mr. Pearce was Senior Vice President and a director of E.F. Hutton, Chairman of
the Board of Governors of the National Association of Securities Dealers, a
Governor of the New York Stock Exchange and a member of the Advisory Council to
the United States Securities and Exchange Commission on the Institutional Study
of the Stock Markets. Mr. Pearce also is a director of StarBase Corporation, a
software development company, and of Bravo International. Mr. Pearce is a
graduate of the University of South Carolina (B.A. 1953) and attended the
Wharton School of Investment Banking at the University of Pennsylvania.

                                      -3-
<PAGE>

         Lt. Gen. Harry E. Soyster (Ret.) has been a director of the Company
since January 1995. He is currently Director of Washington Operations and Vice
President of International Operations of Military Professional Resources,
Incorporated. From 1988 until his retirement in 1991, Lieutenant General Soyster
(Ret.) was the Director of the United States Defense Intelligence Agency. Prior
to that time, he was Commander of the United States Army Intelligence and
Security Command and a Deputy Assistant Chief of Staff for Intelligence,
Department of the Army. Lieutenant General Soyster (Ret.) is a graduate of the
United States Military Academy at West Point (B.S. 1957), Penn State University
(M.S. 1963), the University of Southern California (M.S. 1973) and the National
War College (1977).

         Dr. Edwin Vogt was appointed a director of the Company on September 28,
1998 and joined the Company in December 1998 as a Senior Vice President. Prior
to this date, Dr. Vogt served as a consultant to the Company since 1996. Dr.
Vogt joined IBM in 1961 as Development Programmer and worked in the fields of
hardware development, holding 28 patents, as well as software development. As
manager he was responsible for hardware projects (IBM /360, /370, 433x) as well
as various software projects (a.o. voice recognition products) before being
appointed Director as manager of several Hardware and Software Product
Development Laboratories. As IBM Software Group Executive, Dr. Vogt held the
worldwide responsibility for the development and marketing of IBM Workflow
products and Reengineering tools until retiring from IBM at the end of 1995. In
early 1996 he was appointed Director for the SBS association (Softwarezentrum
Boblingen / Sindelfingen e.V.) and directed the growth of this center to 39
member companies with over 200 experts, predominantly working in high-growth
areas such as Internet, Workflow, Process Automation and Multimedia. Dr. Vogt is
a graduate of the University of Stuttgart with a M.S. in Electrical Engineering
and Mathematics and a Ph.D. in Theoretical Electrical Engineering.

CLASS III DIRECTORS

         Edward G. Newman has been the Company's President since March 1993,
Chief Executive Officer and Chairman of the Board of Directors since December
1994, and a director since 1990. Mr. Newman served as our Treasurer from 1993 to
1994. From 1984 to 1992, Mr. Newman was President of ElectroTech International
Corporation, a software consulting firm. From 1973 to 1981, Mr. Newman was
employed by Xerox Corporation in several management positions in office systems
strategy, legal systems and international financial systems. Mr. Newman served
with the Central Intelligence Agency from 1966 to 1972. Mr. Newman also has been
an Executive Vice President of Tech International since 1990, and a director and
Chief Executive Officer of Tech Virginia since 1994. See "Certain Relationships
and Related Transactions." Mr. Newman is a graduate of the University of
Maryland (B.A. 1971) and the University of New Haven (M.B.A. 1984). Mr. Newman
is the brother of Steven A. Newman, M.D., an Executive Vice President and
director of the Company.

         Steven A. Newman, M.D. has been an Executive Vice President of the
Company since January 2000, a director of the Company since January 1995, and
the Vice Chairman of the Board of Directors since August 1997. See "Business -
Employees and Consultants." Dr. Newman was the Executive Vice President and
Secretary from December 1994 through October 1995 and a consultant of the
Company between January 1996 and December 1999. Dr. Newman also provides
business, management and administrative consulting services to various medical
and business groups. Dr. Newman was President and Chief Executive Officer of Fed
American, Inc., a mortgage banking firm, from 1988 to 1991. Dr. Newman has been
a director of Tech Virginia since 1994. See "Certain Relationships and Related
Transactions."

                                      -4-
<PAGE>

Dr. Newman is a graduate of Brooklyn College (B.A. 1967) and the University of
Rochester (M.D. 1972). Dr. Newman is the brother of Edward G. Newman, our
President, Chief Executive Officer and Chairman of the Board of Directors.

         James J. Ralabate, Esq. has been a director of the Company since
January 1995 and served as our Secretary until August 1997. Mr. Ralabate has
been in the private practice of patent law since 1982. Prior to that time, Mr.
Ralabate was General Patent Counsel for Xerox Corporation, responsible for
worldwide patent licensing and litigation, and an Examiner in the United States
Patent Office. Mr. Ralabate is our intellectual property counsel and is a
graduate of Canisius College (B.S. 1950) and The American University (J.D.
1959).
--------

         John F. Moynahan has been the Company's Senior Vice President and Chief
Financial Officer since May 1999. From June 1998 to January 1999 he was Senior
Vice President and Chief Financial Officer of Precision Auto Care, Inc. and from
October 1994 to June 1998 he was the Company's Senior Vice President and Chief
Financial Officer. Prior to that time, he was Vice President and Treasurer of
Joy Technologies, Inc. and Vice President and Chief Financial Officer of Sym-Tek
Systems, Inc. Mr. Moynahan served as a director of the Company from January 1996
to May 1999. He is a graduate of Colgate University (B.A. 1979) and New York
University (M.B.A. 1982).

COMPENSATION OF DIRECTORS

           The Company currently does not pay or accrue salaries or consulting
fees to outside directors for each board or committee meeting attended. While it
is the Company's intention to establish such payments eventually, it does not
have any current plans to do so. Any payments when implemented will be
comparable to those made by companies of similar size and stage. Directors
receive a grant of options for 50,000 shares of Common Stock upon election and
reelection to the Board of Directors and are entitled for each full year of
service (other than the year of election or reelection), commencing with those
directors who were elected at the 1997 Annual Meeting, to receive a grant of
options to purchase 10,000 shares of Common Stock which vests at the end of such
year of service. Members of the Audit, Compensation and Nominating Committees
are entitled to receive $1,000 for each Audit or Compensation Committee meeting
attended by such member. The Company also has adopted the 1996 Omnibus Stock
Incentive Plan, the 1997 Stock Incentive Plan, the 1999 Stock Incentive Plan and
the 2000 Stock Incentive Plan in which directors are eligible to participate.
See "Executive Compensation - 1996 Omnibus Stock Incentive Plan; -- 1997 Stock
Incentive Plan, 1999 Stock Incentive Plan and 2000 Stock Incentive Plan."

             SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

         Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's directors and executive officers, and persons who own
more than 10% of the Company's Common Stock, to file with the Securities and
Exchange Commission (the "SEC") initial reports of ownership and reports of
changes in ownership of Common Stock and other equity securities of the Company.
Officers, directors and greater than 10% shareholders are required by SEC
regulation to furnish the Company with copies of all Section 16(a) reports they
file. Based solely on the Company's review of the copies of such reports by it,
the Company believes that during fiscal 2000 all such filings were made.


                                      -5-
<PAGE>

         ITEM 11.  EXECUTIVE COMPENSATION

           Summary Compensation Table. The following sets forth the annual and
long-term compensation for services in all capacities to the Company for the
fiscal years ended December 31, 2000, 1999 and 1998 paid to the Company's Chief
Executive Officer ("CEO") and the registrant's four most highly compensated
executive officers other than the CEO who were serving as executive officers at
the end of the last completed fiscal year.
<TABLE>
<CAPTION>
                             SUMMARY COMPENSATION TABLE


                                                                                                  Long Term
                                                                                                Compensation
                                                                                                ------------
Name and Principal Position                                                                        Awards
                                                                                                ------------
                                                            Annual Compensation                 Common Stock
                                                   --------------------------------------        Underlying
                                                   Year            Salary           Bonus          Options          All Other
                                                   ----            ------           -----          -------          ---------
<S>                                           <C>           <C>          <C>  <C>          <C>        <C>        <C>          <C>
EDWARD G. NEWMAN
     Chief Executive Officer and Chairman
     of the Board of Directors                2000          $    263,476 (1)  $     50,000 (2)        50,000     $     76,211 (3)
                                              1999          $    223,294 (1)           $0            441,665     $     35,400 (3)
                                              1998          $    250,923 (1)           $0                  0     $     47,400 (3)

KAZUYUKI TOYOSATO
     Executive Vice President                 2000          $    277,527               $0             10,000     $      1,471 (4)
                                              1999          $    251,676               $0            110,000     $     28,385 (4)
                                              1998          $    172,086               $0             10,000     $          0

DR. STEVEN A. NEWMAN
     Executive Vice President
     And Vice Chairman of the
     Board of Directors                       2000          $    240,351 (5)  $   150,000 (6)         50,000     $     22,122 (7)
                                              1999          $     13,476 (5)           $0            441,750     $    176,550 (7)
                                              1998          $     13,476 (5)           $0             10,000     $    163,476 (7)

DR. JOSEPH BEN-DAK
     Executive Vice President                 2000          $    185,000               $0                  0     $     61,019 (8)
                                              1999          $    138,319 (9)           $0            242,679     $          0
                                              1998          $          0               $0                  0     $          0

JOHN F. MOYNAHAN
     Senior Vice President, Chief Financial
     Officer and Treasurer                    2000          $    170,000      $    25,000 (2)              0     $     39,875 (9)
                                              1999          $     82,288 (8)           $0            331,741     $     16,500 (4)
                                              1998          $     93,507 (8)           $0                  0     $      7,500 (4)
------------------
</TABLE>
(1)  Includes $13,476 paid by Tech Virginia in each of 2000, 1999 and 1998.
     Compensation does not include $58,400, $53,732, and $50,000 paid to Frances
     C. Newman, wife of Edward G. Newman in 2000, 1999 and 1998, respectively.

                                      -6-
<PAGE>

(2)  Represents payment of a signing bonus as an incentive for the executive to
     enter into his employment agreement.

(3)  Includes payment of (i) non-accountable expense and transportation
     allowances and (ii) other miscellaneous compensation. Excludes payment of
     $25,057 in salary that was earned in 1999 but that was paid in 2000; this
     deferred compensation was accrued and reported as 1999 compensation in this
     and the prior year Proxy Statement.

(4)  Includes payment of (i) non-accountable expense and transportation
     allowances and (ii) other miscellaneous compensation.

(5)  Includes compensation related to services performed as an Executive Vice
     President of the Company since January 1, 2000 and $13,476 paid by Tech
     Virginia in each of 2000, 1999 and 1998.

(6)  Represents payment of a $50,000 signing bonus as an incentive for the
     executive to enter into his employment agreement and a $100,000 annual
     bonus for services performed during 2000.

(7)  Includes payment of (i) consulting fees related to services performed as a
     consultant to the Company prior to January 1, 2000, (ii) non-accountable
     expense and transportation allowances and (iii) other miscellaneous
     compensation. Excludes payment of $43,750 in compensation that was earned
     in 1999 but that was paid in 2000; this deferred compensation was accrued
     and reported as 1999 compensation in this and the prior year Proxy
     Statement.

(8)  Mr. Moynahan resigned from his positions with the Company effective June 3,
     1998 and resumed these positions effective May 10, 1999.

(9)  Includes payment of (i) non-accountable expense and transportation
     allowances, (ii) other miscellaneous compensation and (iii) $10,375 in
     compensation that was earned in 1999 but that was paid in 2000. Excludes
     payment of an additional $14,080 in salary that was earned in 1999 but that
     was paid in 2000; this deferred compensation was accrued and reported as
     1999 compensation in this and the prior year Proxy Statement.

(10) Dr. Ben-Dak was hired as an executive of the Company in June 1999.

                                      -7-
<PAGE>

     OPTION GRANTS TABLE. The following table sets forth information on grants
of stock options during fiscal 2000 to executive officers and directors of the
Company. All such options are exercisable to purchase shares of Common Stock.
<TABLE>
<CAPTION>
                                       Options      Percent of Total         Exercise or Base Price     Expiration Date
                                       Granted    Options Granted to         ($Share)
                                      (Shares)     Employees in Year
<S>                                    <C>            <C>                            <C>                        <C>
Eugene J. Amobi                        150,000        12.4111%                       $5.8750            January 3, 2010
                                        10,000         0.8274%                       $4.8125            October 20, 2010
Dr. Joseph Ben-Dak                           0         0.0000%                       n/a                n/a
Keith P. Hicks, Esq.                    10,000         0.8274%                       $4.8125            October 20, 2010
John F. Moynahan                             0         0.0000%                       n/a                n/a
Edward G. Newman                        50,000         4.1370%                       $4.8125            October 20, 2010
Steven A. Newman, M.D.                  50,000         4.1370%                       $4.8125            October 20, 2010
Phillip E. Pearce                       10,000         0.8274%                       $4.8125            October 20, 2010
James J. Ralabate, Esq.                 50,000         4.1370%                       $4.8125            October 20, 2010
Lt. Gen Harry E. Soyster (Ret.)         10,000         0.8274%                       $4.8125            October 20, 2010
Kazuyuki Toyosato                       10,000         0.8274%                       $4.8125            October 20, 2010
Dr. Edwin Vogt                          10,000         0.8274%                       $4.8125            October 20, 2010
Martin Eric Weisberg, Esq.              10,000         0.8274%                       $4.8125            October 20, 2010

Fiscal Year-End Options/Option Values Table.

                                     Number of Securities Underlying             Value of Unexercised In-The-Money
                                     Unexercised Options at Fiscal               Options at Fiscal Year-End ($)
                                                   Year End
                                     Exercisable        Unexercisable               Exercisable      Unexercisable
                                     --------------- -- ------------------- ---- ------------------- ------------------------

Eugene J. Amobi                             200,000                190,000            $7,500         $      -
Dr. Joseph Ben-Dak                           70,893                130,893            $7,500         $ 15,000
Keith P. Hicks, Esq.                         80,000                 10,000            $1,250         $      -
John F. Moynahan                            160,581                160,580            $  -           $      -
Edward G. Newman,                           402,777                 63,888           $85,938         $      -
Steven A. Newman, M.D.                      501,167                 60,583           $91,372         $      -
Phillip E. Pearce                           105,000                 10,000            $1,250         $      -
James J. Ralabate, Esq.                     110,000                 50,000            $8,750         $      -
Lt. Gen Harry E. Soyster (Ret.)             130,000                 10,000            $1,250         $      -
Kazuyuki Toyosato                            90,000                 90,000            $1,250         $      -
Dr. Edwin Vogt                               96,667                 98,334            $1,250         $      -
Martin Eric Weisberg, Esq.                   95,000                 10,000            $4,375         $      -
</TABLE>

     The Company has no retirement, pension or profit sharing program for the
benefit of its directors, officers or other employees, but the Board of
Directors may recommend one or more such programs for adoption in the future.

EMPLOYMENT AGREEMENTS

     Edward G. Newman is employed with the Company pursuant to a three-year
employment agreement expiring on December 31, 2002. This agreement calls for an
initial base salary of $250,000 with annual increases at the United States
Consumer Price Index ("CPI") percentage plus three percent, subject to a ceiling
of 10%; an annual bonus, payable at the discretion of the Board of Directors in
cash, shares of Common Stock, options to purchase shares of Common Stock, stock
appreciation rights or any combination thereof, in an amount to be determined by
the Board of Directors; a $2 million life insurance policy payable to his
designated beneficiaries; and an annual grant of stock options in an amount
equal to the greater of (i) 1.5% of the

                                      -8-
<PAGE>

"Revenue Goal" where "Revenue Goal" is equal to 85% of the Company's revenue
goal for each fiscal year during the term of employment, if the Revenue Goal is
attained, and (ii) 2% of the increase, if any, in the market capitalization,
based on the average of the number of shares outstanding and the closing prices
of the Common Stock for the 30 days ended December 31 of the applicable year
compared to the comparable 30 day period in the prior year, from January 1 to
December 31 of the applicable fiscal year ("Performance Options"), with a limit
on such grant of the greater of 500,000 shares or 1.5% of the then-outstanding
shares of Common Stock in any given fiscal year during the term of the
employment agreement. The Performance Options are exercisable at a price equal
to the average of the closing price of the Common Stock for 30 days prior to the
end of the applicable fiscal year. As an incentive to enter into this agreement,
Mr. Newman received an initial payment of $50,000. In the event of a change of
control or Mr. Newman terminating his employment for good cause, Mr. Newman is
entitled to a severance payment of the greater of two years or the remaining
term of this agreement and the Performance Options for the year of termination
and the following year. This agreement provides Mr. Newman with benefits which
the Company may provide to its executive officers, including health care
insurance, automobile allowance and vacation.

     Dr. Steven A. Newman is employed with the Company pursuant to a three-year
employment agreement expiring on December 31, 2002. This agreement calls for an
initial base salary of $225,000 with annual increases at the CPI percentage plus
three percent, subject to a ceiling of 10%; an annual bonus, payable at the
discretion of the Board of Directors in cash, shares of Common Stock, options to
purchase shares of Common Stock, stock appreciation rights or any combination
thereof, in an amount to be determined by the Board of Directors, with a minimum
bonus of $100,000 set for 2000; a $2 million life insurance policy payable to
his designated beneficiaries; and an annual grant of Performance Options, if
applicable, with an exercise price equal to the average of the closing price of
the Common Stock for 30 days prior to the end of the applicable fiscal year,
with a limit on such grant of the greater of 500,000 shares or 1.5% of the
then-outstanding shares of Common Stock in any given year. As an incentive to
enter into this agreement, Dr. Newman received an initial payment of $50,000. In
the event of a change of control or Dr. Newman terminating his employment for
good cause, Dr. Newman is entitled to a severance payment of the greater of two
years or the remaining term of this agreement, and the Performance Options for
the year after termination and the following year. This agreement provides Dr.
Newman with benefits which the Company may provide to its executive officers,
including health care insurance, automobile allowance and vacation.

     John F. Moynahan is employed with the Company pursuant to a three-year
employment agreement expiring on December 31, 2002. This agreement calls for an
initial base salary of $170,000 with annual increases at the CPI percentage plus
three percent subject to a ceiling of 10%; an annual cash bonus to be determined
by the Board of Directors; a $750,000 life insurance policy payable to his
designated beneficiaries; and an annual grant of stock options to be determined
by increases in revenues or market capitalization over the prior year, at the
price in effect at the time such grant is made, with a limit on such grant of
the greater of 100,000 shares or 0.33% of the then-outstanding stock in any
given year. As an incentive to enter into this agreement, Mr. Moynahan received
an initial payment of $25,000. In the event of a change of control or Mr.
Moynahan terminating his employment for good cause, Mr. Moynahan is entitled to
a severance payment of the greater of two years or the remaining term of this
agreement, the Performance Options for the year after termination and the
following year, and immediate vesting of options. This agreement provides Mr.
Moynahan with benefits which the Company may provide to its executive officers,
including health care insurance, automobile allowance and vacation.

                                      -9-
<PAGE>

     Kazuyuki Toyosato has been employed with the Company pursuant to a
three-year employment agreement which expired on March 3, 2000. This employment
agreement provided for a minimum annual salary of $153,575. Although the
employment agreement with Mr. Toyosato has terminated, Mr. Toyosato remains an
employee of the Company.

     Dr. Edwin Vogt is employed pursuant to a five-year employment agreement
expiring on December 31, 2004. Pursuant to this agreement, Dr. Vogt receives an
annual base salary of $150,000, which can be adjusted annually at the discretion
of management.

     Eugene J. Amobi is employed pursuant to a three-year employment agreement
expiring on December 31, 2003. This agreement provides for an annual base salary
of $140,000 and an annual discretionary bonus to be determined by the Company
for each full year of employment with the Company based upon the performance of
Mr. Amobi during such year as well as the Company's overall performance during
such year. As an incentive to enter into this agreement, Mr. Amobi was granted
the right to purchase 150,000 shares of Common Stock, which right will vest over
a period of three years in increments of 50,000 shares per year on December 31
of each year beginning December 31, 2000 through December 31, 2002. Any unvested
option granted to Mr. Amobi pursuant to this employment agreement will fully
vest upon a change of control or upon the termination of the employment
agreement by Mr. Amobi for good reason. This agreement provides Mr. Amobi with
benefits which the Company may provide to its executive officers, including
health care insurance, automobile allowance and vacation.

COMPENSATION PLANS

     The following are the compensation plans of the Company currently in
effect.

1996 OMNIBUS STOCK INCENTIVE PLAN

     The 1996 Omnibus Stock Incentive Plan (the "1996 Incentive Plan") was
adopted by the Company's Board of Directors effective January 1, 1996. The 1996
Incentive Plan provides for the granting of incentive stock options ("Incentive
Stock Options") within the meaning of Section 422 of the Internal Revenue Code
of 1986, as amended (the "Code"), nonqualified stock options, stock appreciation
rights ("SARs") and grants of shares of Common Stock subject to certain
restrictions ("Restricted Stock") up to a maximum of 650,000 shares to officers,
directors, employees and others. Incentive Stock Options can be awarded only to
employees of the Company at the time of the grant. No options, SARs or
restricted stock ("Restricted Stock") may be granted under the 1996 Incentive
Plan subsequent to December 31, 2006.

     The 1996 Incentive Plan is administered by the Compensation Committee of
the Board of Directors (subject to the authority of the full Board of
Directors), which determines the terms and conditions of the options, SARs and
Restricted Stock granted under the 1996 Incentive Plan, including the exercise
price, number of shares subject to the option and the exercisability thereof.
Dr. Steven A. Newman, Lt. Gen. Harry E. Soyster (Ret.) and Martin Eric Weisberg,
Esq. currently are the members of the Compensation Committee.

     The exercise price of all Incentive Stock Options granted under the 1996
Incentive Plan must equal at least the fair market value of the Common Stock on
the date of grant. In the case of an optionee who owns stock possessing more
than 10% of the total combined voting power of all classes of stock of the
Company ("Substantial Stockholders"), the exercise price of Incentive Stock
Options must be at least 110% of the fair market value of the Common Stock on
the date

                                      -10-
<PAGE>

of grant. The exercise price of all nonqualified stock options granted under the
1996 Incentive Plan shall be determined by the Compensation Committee. The term
of any Incentive Stock Option granted under 1996 the Incentive Plan may not
exceed ten years, or, for Incentive Stock Options granted to Substantial
Stockholders, five years. The 1996 Incentive Plan may be amended or terminated
by the Board of Directors, but no such action may impair the rights of a
participant under a previously granted option.

     The 1996 Incentive Plan provides the Board of Directors or the Compensation
Committee the discretion to determine when options granted thereunder shall
become exercisable and the vesting period of such options. Upon termination of a
participant's employment or relationship with the Company, all options terminate
and no longer are exercisable unless termination is due to death or disability,
in which case the options are exercisable within one year of termination. The
Compensation Committee has granted extensions of the period before which options
may be exercised for certain terminated employees.

     The 1996 Incentive Plan provides that upon a change in control of the
Company, all previously granted options and SARs immediately shall become
exercisable in full and all Restricted Stock immediately shall vest and any
applicable restrictions shall lapse. The 1996 Incentive Plan defines a change of
control as the consummation of a tender offer for 25% or more of the outstanding
voting securities of the Company, a merger or consolidation of the Company into
another corporation less than 75% of the outstanding voting securities of which
are owned in aggregate by the stockholders of the Company immediately prior to
the merger or consolidation, the sale of substantially all of the Company's
assets other than to a wholly-owned subsidiary, or the acquisition by any
person, business or entity other than by reason of inheritance of over 25% of
the Company's outstanding voting securities. The change of control provisions of
the 1996 Incentive Plan may operate as a material disincentive or impediment to
the consummation of any transaction which could result in a change of control.

     The 1996 Incentive Plan provides the Board of Directors or the Compensation
Committee discretion to grant SARs in connection with any grant of options. Upon
the exercise of a SAR, the holder shall be entitled to receive a cash payment in
an amount equal to the difference between the exercise price per share of
options then exercised by him and the fair market value of the Common Stock as
of the exercise date. The holder is required to exercise options covering the
number of shares, which are subject to the SAR so exercised. SARs are not
exercisable during the first six months after the date of grant, and may be
transferred only by will or the laws of descent and distribution.

     The 1996 Incentive Plan also provides the Board of Directors or the
Compensation Committee discretion to grant to key persons shares of Restricted
Stock subject to certain limitations on transfer and substantial risks of
forfeiture.

1997 STOCK INCENTIVE PLAN

     The 1997 Stock Incentive Plan (the "1997 Incentive Plan") was adopted by
the Company's Board of Directors on April 10, 1997. The 1997 Incentive Plan
provides for the granting of Incentive Stock Options within the meaning of
Section 422 of the Code, nonqualified stock options, SARs and grants of shares
of Common Stock subject to certain restrictions (collectively, "Awards") up to a
maximum of 1,650,000 shares to officers, directors, key employees and others.
Incentive Stock Options can be awarded only to employees of the Company at the
time of the grant. No ISO may be granted under the 1997 Incentive Plan after
April 9, 2007.

                                      -11-
<PAGE>

     The 1997 Incentive Plan is administered by the Board of Directors or a
Committee of the Board of Directors, which determines the terms and conditions
of the Awards granted under the 1997 Incentive Plan, including the exercise
price, number of shares subject to the option and the exercisability thereof.
Dr. Steven A. Newman, Lt. Gen. Harry E. Soyster (Ret.) and Martin Eric Weisberg,
Esq. currently are the members of the Committee.

     The exercise price of all Incentive Stock Options granted under the 1997
Incentive Plan must equal at least the fair market value of the Common Stock on
the date of grant. In the case of Substantial Stockholders, the exercise price
of Incentive Stock Options must be at least 110% of the fair market value of the
Common Stock on the date of grant. The exercise price of all nonqualified stock
options granted under the 1997 Incentive Plan shall be determined by the
Compensation Committee. The term of any Incentive Stock Option granted under the
1997 Incentive Plan may not exceed ten years, or, for Incentive Stock Options
granted to Substantial Stockholders, five years. The 1997 Incentive Plan may be
amended or terminated by the Board of Directors, but no such action may impair
the rights of a participant under a previously granted option.

     The 1997 Incentive Plan provides the Committee the discretion to determine
when options granted thereunder shall become exercisable and the vesting period
of such options. Upon termination of a participant's employment or relationship
with the Company, options may be exercised only to the extent exercisable on the
date of such termination (within three months), but not thereafter, unless
termination is due to death or disability, in which case the options are
exercisable within one year of termination.

     The 1997 Incentive Plan provides the Committee discretion to grant SARs to
key employees, consultants and directors. Promptly after exercise of a SAR the
holder shall be entitled to receive in cash, by check or in shares of Common
Stock, an amount equal to the excess of the fair market value on the exercise
date of the shares of Common Stock as to which the SAR is exercised over the
base price of such shares, which shall be determined by the Committee

     The 1997 Incentive Plan also provides the Committee discretion to grant to
key persons shares of restricted stock subject to certain contingencies and
restrictions as the Committee may determine.

1999 STOCK INCENTIVE PLAN

     The 1999 Stock Incentive Plan (the "1999 Incentive Plan") was adopted by
the Company's Board of Directors on November 12, 1999. The 1999 Incentive Plan
provides for the granting of Incentive Stock Options within the meaning of
Section 422 of the Code, nonqualified stock options, SARs and grants of shares
of Common Stock subject to certain restrictions (collectively, "Awards") up to a
maximum of 3,000,000 shares to officers, directors, key employees and others.
Incentive Stock Options can be awarded only to employees of the Company at the
time of the grant. No ISO may be granted under the 1999 Incentive Plan after
November 12, 2009.

     The 1999 Incentive Plan is administered by the Board of Directors or a
Committee of the Board of Directors, which determines the terms and conditions
of the Awards granted under the 1999 Incentive Plan, including the exercise
price, number of shares subject to the option and the exercisability thereof.
Dr. Steven A. Newman, Lt. Gen. Harry E. Soyster (Ret.) and Martin Eric Weisberg,
Esq. currently are the members of the Committee.

                                      -12-
<PAGE>

     The exercise price of all Incentive Stock Options granted under the 1999
Incentive Plan must equal at least the fair market value of the Common Stock on
the date of grant. In the case of Substantial Stockholders, the exercise price
of Incentive Stock Options must be at least 110% of the fair market value of the
Common Stock on the date of grant. The exercise price of all nonqualified stock
options granted under the 1999 Incentive Plan shall be determined by the
Compensation Committee. The term of any Incentive Stock Option granted under the
1999 Incentive Plan may not exceed ten years, or, for Incentive Stock Options
granted to Substantial Stockholders, five years. The 1999 Incentive Plan may be
amended or terminated by the Board of Directors, but no such action may impair
the rights of a participant under a previously granted option.

     The 1999 Incentive Plan provides the Committee the discretion to determine
when options granted thereunder shall become exercisable and the vesting period
of such options. Upon termination of a participant's employment or relationship
with the Company, options may be exercised only to the extent exercisable on the
date of such termination (within three months), but not thereafter, unless
termination is due to death or disability, in which case the options are
exercisable within one year of termination.

     The 1999 Incentive Plan provides the Committee discretion to grant SARs to
key employees, consultants and directors. Promptly after exercise of a SAR the
holder shall be entitled to receive in cash, by check or in shares of Common
Stock, an amount equal to the excess of the fair market value on the exercise
date of the shares of Common Stock as to which the SAR is exercised over the
base price of such shares, which shall be determined by the Committee

     The 1999 Incentive Plan also provides the Committee discretion to grant to
key persons shares of restricted stock subject to certain contingencies and
restrictions as the Committee may determine.

2000 STOCK INCENTIVE PLAN

     The 2000 Stock Incentive Plan (the "2000 Incentive Plan") was adopted by
the Company's Board of Directors on September 13, 2000. The 2000 Incentive Plan
provides for the granting of Incentive Stock Options within the meaning of
Section 422 of the Code, nonqualified stock options, SARs and grants of shares
of Common Stock subject to certain restrictions (collectively, "Awards") up to a
maximum of 3,000,000 shares to officers, directors, key employees and others.
Incentive Stock Options can be awarded only to employees of the Company at the
time of the grant. No ISO may be granted under the 2000 Incentive Plan after
September 13, 2010.

     The 2000 Incentive Plan is administered by the Board of Directors or a
Committee of the Board of Directors, which determines the terms and conditions
of the Awards granted under the 2000 Incentive Plan, including the exercise
price, number of shares subject to the option and the exercisability thereof.
Dr. Steven A. Newman, Lt. Gen. Harry E. Soyster (Ret.) and Martin Eric Weisberg,
Esq. currently are the members of the Committee.

     The exercise price of all Incentive Stock Options granted under the 2000
Incentive Plan must equal at least the fair market value of the Common Stock on
the date of grant. In the case of Substantial Stockholders, the exercise price
of Incentive Stock Options must be at least 110% of the fair market value of the
Common Stock on the date of grant. The exercise price of all nonqualified stock
options granted under the 2000 Incentive Plan shall be determined by the

                                      -13-
<PAGE>

Compensation Committee. The term of any Incentive Stock Option granted under the
2000 Incentive Plan may not exceed ten years, or, for Incentive Stock Options
granted to Substantial Stockholders, five years. The 2000 Incentive Plan may be
amended or terminated by the Board of Directors, but no such action may impair
the rights of a participant under a previously granted option.

     The 2000 Incentive Plan provides the Committee the discretion to determine
when options granted thereunder shall become exercisable and the vesting period
of such options. Upon termination of a participant's employment or relationship
with the Company, options may be exercised only to the extent exercisable on the
date of such termination (within three months), but not thereafter, unless
termination is due to death or disability, in which case the options are
exercisable within one year of termination.

     The 2000 Incentive Plan provides the Committee discretion to grant SARs to
key employees, consultants and directors. Promptly after exercise of a SAR the
holder shall be entitled to receive in cash, by check or in shares of Common
Stock, an amount equal to the excess of the fair market value on the exercise
date of the shares of Common Stock as to which the SAR is exercised over the
base price of such shares, which shall be determined by the Committee.

     The 2000 Incentive Plan also provides the Committee discretion to grant to
key persons shares of restricted stock subject to certain contingencies and
restrictions as the Committee may determine.

     As of December 31, 2000 a total of 4,850,752 options had been issued and
were outstanding pursuant to the Company's stock incentive plans. Each of the
outstanding options has an exercise price at least equal to the fair market
value of the Common Stock on the date of grant. As of December 31, 2000, there
were no SARs outstanding and there have been three grants of Restricted Stock of
50,000 shares of Common Stock to three officers of the Company.

     COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

     The members of the Compensation Committee participate in all deliberations
concerning executive compensation. The Compensation Committee consists of Lt.
Gen. Harry E. Soyster (Ret.), Dr. Steven A. Newman and Martin Eric Weisberg,
Esq. No executive officer of the Company serves as a member of the board of
directors or compensation committee of any entity which has one or more
executive officers serving as a member of the Company's Board of Directors.

                     REPORT OF THE COMPENSATION COMMITTEE ON
                             EXECUTIVE COMPENSATION

OVERVIEW AND PHILOSOPHY

         The Compensation Committee of the Board of Directors is responsible for
developing and making recommendations to the Board of Directors with respect to
the Company's executive compensation policies. In addition, the Compensation
Committee, pursuant to authority delegated by the Board of Directors, determines
the compensation to be paid to the Chief Executive Officer and each of the other
executive officers of the Company.

         The objectives of the Company's executive compensation program are to:

                                      -14-
<PAGE>

          o    Support the achievement of desired Company performance

          o    Provide compensation that will attract and retain superior talent
               and reward performance

         The executive compensation program provides an overall level of
compensation opportunity that is competitive within the technology and software
industries, as well as with a broader group of companies of comparable size and
complexity.

EXECUTIVE OFFICER COMPENSATION PROGRAM

         The Company's executive officer compensation program is comprised of
base salary, long-term incentive compensation in the form of stock options,
specific performance-based bonuses and various benefits, including medical and
pension plans generally available to employees of the Company.

BASE SALARY

         Base salary levels for the Company's executive officers are
competitively set relative to companies in the technology industry. In
determining salaries, the Committee also takes into account individual
experience and performance and specific issues particular to the Company.

STOCK OPTION PROGRAM

         The stock option program is the Company's long-term incentive plan for
providing an incentive to officers, directors, employees and others.

         The 1996 Incentive Plan, the 1997 Incentive Plan, 1999 Stock Incentive
Plan and the 2000 Incentive Plan authorize the Compensation Committee to award
officers, directors, employees and others stock options. Options granted under
such Plans may be granted containing terms determined by the Committee,
including exercise period and price; provided, however, that each Plan requires
that exercise price may not be less than the fair market value of the Common
Stock on the date of the grant and the exercise period may not exceed ten years,
subject to further limitations.

BENEFITS

         The Company provides to executive officers, medical and pension
benefits that generally are available to Company employees.

BONUS

         The Company provides to certain executive officers bonuses based on
performance and/or a change of control of the Company.

CHIEF EXECUTIVE OFFICER COMPENSATION

         In the case of Edward G. Newman, the Company's Chief Executive Officer,
the Compensation Committee evaluates the performance of the Company, the
improvement of the Company's financial position and the Chief Executive
Officer's contributions to the Company

                                      -15-
<PAGE>

and its growth as well as the considerations impacting the compensation of
executive officers generally described above. Mr. Newman is employed with the
Company pursuant to a three-year employment agreement expiring on December 31,
2002. See "Employment Agreements". Based on Mr. Newman's leadership efforts and
commitment to the Company, the Company's 2000 operating performance and the
criteria described above, in addition to a base salary of $263,476, payment of
non-accountable expense and transportation allowances and other miscellaneous
compensation of $76,211, a bonus of $50,000, and options to purchase 50,000
shares of the Company's Common Stock, were granted to Mr. Newman by the
Compensation Committee for the fiscal year ending December 31, 2000.



                                           Steven A. Newman
                                           Lt. Gen. Harry E. Soyster (Ret.)
                                           Martin Eric Weisberg, Esq.
                                           Members of the Compensation Committee


<PAGE>


PERFORMANCE GRAPH

         Set forth below is a graph comparing the yearly change in the
cumulative stockholder return on the Company's Common Stock with the Russell
2000 Index, the NASDAQ Composite Index and the Nasdaq Computer Manufacturing
Index. The graph assumes that $100 was invested in the Company at its Initial
Public Offering in the Common Stock and in each index, and that all dividends
were reinvested. No cash dividends have been declared on the Common Stock. The
stockholder returns shown on the graph below are not necessarily indicative of
future performance.




                        [PERFORMANCE GRAPH APPEARS HERE]



                                      -16-
<PAGE>



     ITEM 12:  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

                 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

         The following table sets forth as of April 25, 2001, certain estimated
information regarding the ownership of voting securities of the Company by each
stockholder known to the management of the Company to be (i) the beneficial
owner of more than 5% of the Company's outstanding Common Stock, (ii) the
directors during the last fiscal year and nominees for director of the Company,
(iii) the executive officers named in the Summary Compensation Table herein
under "Executive Compensation" and (iv) all executive officers and directors as
a group. The Company believes that the beneficial owners of the Common Stock
listed below, based on information furnished by such owners, have sole
investment and voting power with respect to such shares.

                                        Amount of Shares             Percentage
Name                                   Beneficially Owned               Owned
----                                   ------------------               -----

EUGENE J. AMOBI                             500,000           (1)       1.2%
12701 Fair Lakes Circle
Fairfax, Virginia 22033

DR. JOSEPH BEN-DAK                           70,893           (2)        *
12701 Fair Lakes Circle
Fairfax, Virginia  22033

KEITH P. HICKS, ESQ.                        399,597           (3)        *
4121 Roberts Road
Fairfax, Virginia 22032

JOHN F. MOYNAHAN                            210,583           (4)        *
12701 Fair Lakes Circle
Fairfax, Virginia 22033

EDWARD G. NEWMAN                           2,788,565          (5)       5.9%
12701 Fair Lakes Circle
Fairfax, Virginia 22033

STEVEN A. NEWMAN, M.D.                     1,492,147          (6)       3.1%
12701 Fair Lakes Circle
Fairfax, Virginia 22033

                             -18-
<PAGE>


PHILLIP E. PEARCE
12701 Fair Lakes Circle
Fairfax, Virginia 22033

JAMES J. RALABATE, ESQ                      168,726           (8)        *
5792 Main Street
Williamsville, New York 14221

LT. GEN. HARRY E. SOYSTER (RET.)            149,364           (9)        *
12701 Fair Lakes Circle
Fairfax, Virginia 22033

KAZUYUKI TOYOSATO                            90,000           (10)       *
Urban Square Yokohama Bldg. 10F 1-1
Sakae-cho Yokohoma-shi Kanagawa
221-0052 Japan

DR. EDWIN VOGT                              116,667           (10)       *
12701 Fair Lakes Circle
Fairfax, Virginia 22033

MARTIN ERIC WEISBERG, ESQ.                  132,000           (12)       *
405 Lexington Avenue
New York, New York 10174

All Officers and directors as a group      6,223,542          (13)     12.6%
(12 persons)
----------

 *  Less than 1%

(1)  Includes 200,000 shares of Common Stock issuable upon exercise of currently
     exercisable options.

(2)  Includes 70,893 shares of Common Stock issuable upon exercise of currently
     exercisable options.

(3)  Includes 80,000 shares of Common Stock issuable upon exercise of currently
     exercisable options.

(4)  Includes 160,583 shares of Common Stock issuable upon exercise of currently
     exercisable options, and 50,000 shares of Common Stock issuable upon
     exercise of stock options exercisable within 60 days of April 25, 2001.

(5)  Includes (a) 402,777 shares of Common Stock issuable upon exercise of
     currently exercisable options, (b) 200,000 shares of Common Stock
     beneficially owned by an irrevocable trust established by Mr. Newman for
     the benefit of his children, (c) 218,000 shares registered under the name
     of Bear Stearns pursuant to a pledge agreement between Mr. Newman and Bear
     Stearns, (d) 1,765 shares beneficially owned by Mr. Newman and his wife,
     Frances C. Newman, as joint tenants and (e) 9,000 shares owned by an
     irrevocable trust established by Dr. Steven A. Newman for which Mr. Newman
     is trustee. Does not include (a) 761,950 shares of Common Stock

                                      -19-
<PAGE>

     beneficially owned by Mr. Newman's wife, Frances C. Newman; (b) 28,900
     shares of Common Stock beneficially owned by an irrevocable trust
     established by Mr. Newman for the benefit of his sister; and (c) 28,900
     shares of Common Stock beneficially owned by an irrevocable trust
     established by Mr. Newman for the benefit of his mother. Mr. Newman
     disclaims beneficial ownership of all such shares.

(6)  Includes (a) 501,166 shares of Common Stock issuable upon exercise of
     currently exercisable options, (b) 100,000 shares of Common Stock
     beneficially owned by an irrevocable trust established by Dr. Newman for
     the benefit of his children, for which shares Dr. Newman disclaims
     beneficial ownership, (c) 500,000 shares registered under the name of Bear
     Stearns pursuant to a pledge agreement between Dr. Newman and Bear Stearns
     and (d) 32,000 shares owned by an irrevocable trust established by Edward
     G. Newman for which Dr. Newman is trustee.

(7)  Includes 105,000 shares of Common Stock issuable upon exercise of currently
     exercisable options.

(8)  Includes 110,000 shares of Common Stock issuable upon exercise of currently
     exercisable options.

(9)  Includes 130,000 shares of Common Stock issuable upon exercise of currently
     exercisable options.

(10) Includes 90,000 shares of Common Stock issuable upon exercise of currently
     exercisable options.

(11) Includes 96,667 shares of Common Stock issuable upon exercise of currently
     exercisable options.

(12) Includes (a) 105,000 shares of Common Stock issuable upon exercise of
     currently exercisable options and (b) 18,000 shares of Common Stock
     beneficially owned by Mr. Weisberg's children and 9,000 shares of Common
     Stock beneficially owned by Mr. Weisberg's wife. Mr. Weisberg disclaims
     beneficial ownership of all shares owned by his wife and children.

(13) Includes 2,102,086 shares of Common Stock issuable to the group upon
     exercise of currently exercisable options.


                                      -20-
<PAGE>


ITEM 13:  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     In connection with transactions described below, the Company did not secure
an independent determination of the fairness and reasonableness of such
transactions and arrangements with affiliates of the Company. In each instance
described below, the disinterested directors (either at or following the time of
the transaction) reviewed and approved the fairness and reasonableness of the
terms of the transaction. The Company believes that each transaction was fair
and reasonable to the Company and on terms at least as favorable as could have
been obtained from non-affiliates. Transactions between any corporation and its
officers and directors are subject to inherent conflicts of interest.

TECH INTERNATIONAL AND TECH VIRGINIA

     Since December 1992, the Company has maintained various business
relationships with Tech International and since 1994, with Tech Virginia. Tech
International operates a computer software and consulting business. Until
December 30, 1994, Tech International's Virginia operations were conducted
through its Virginia business unit. On December 30, 1994, Tech International
spun-off the Virginia business unit (the "Spin-Off") as Tech Virginia. Edward G.
Newman, a principal stockholder, director and the Chairman, President and Chief
Executive Officer of the Company, Steven A. Newman, an Executive Vice President
and Vice Chairman of the Board of Directors of the Company and Eugene J. Amobi,
a director of the Company, were the stockholders, and continue as officers and
directors of Tech Virginia. Eugene J. Amobi is the sole director and stockholder
of Tech International

MANAGEMENT PERSONNEL AGREEMENTS WITH TECH VIRGINIA

     Messrs. Edward G. Newman, Steven A. Newman and Eugene Amobi each had
employment agreements with Tech Virginia under which each of them was entitled
to a salary and each was eligible to receive certain bonuses. The agreements
with Messrs. Edward G. Newman and Steven A. Newman required each of them to
devote only reasonable time and attention to Tech Virginia, provided their
activities for Tech Virginia did not interfere with their obligations to the
Company. Upon the acquisition of Tech Virginia by the Company, such employment
agreements were terminated by agreement with Messrs. Newman, Newman, and Amobi.
Messrs. Newman, Newman and Amobi have continued to provide services to Tech
Virginia since the acquisition without contract but under similar terms and
conditions as their terminated agreements.

LEGAL SERVICES

     The Company uses a member of its Board of Directors as its patent counsel.
The Company ad expenditures of $174,468, $239,598 and $164,956 during 2000, 1999
and 1998, respectively, in legal services payable tot his Director. this
Director also serves as the Company's processing agent for payments made to
various other domestic and international law firms and agencies used to file and
maintain patents and trademarks. The Director is paid only the amount owed by
the Company to the other law firms and does not directly profit from these
services. the Company made payments of $266,026, $224,377 and $148,231 during
2000, 1999 and 1998, respectively, to this Director related to his services as
processing agent.

     The Company uses a law firm, in which an officer and member of its Board of
Directors is a partner, for services related to securities, financings,
litigation and other general legal matters.

                                      -21-
<PAGE>

The Company had expenditures of $446,320, $663,075 and $345,207 during 2000,
1999 and 1998, respectively, in legal services payable to this law firm.


                                      -22-
<PAGE>


     ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

     Exhibit          Description
     -------          -----------

     23.1         Consent of Grant Thornton LLP


                                      -23-
<PAGE>
<TABLE>
<CAPTION>
                                   SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                       Xybernaut Corporation
<S>                                    <C>
Dated: April 27, 2001
                                       By: /s/ Edward G. Newman
                                          --------------------------------------------------
                                          Edward G. Newman
                                          President, Chief Executive Officer and
                                          Chairman of the Board of Directors

         In accordance with the Exchange Act, this report has been signed by the
following persons in the capacities and on the dates indicated:

                 Signature                                            Title                                    Date


/s/ Edward G. Newman                          President, Chief Executive Officer and Chairman of     April 27, 2001
--------------------------------------------  the Board of Directors
Edward G. Newman


/s/ Steven A. Newman, M.D.                    Executive Vice President and Vice Chairman of the      April 27, 2001
--------------------------------------------  Board of Directors
Steven A. Newman, M.D.


/s/ John F. Moynahan                          Senior Vice President, Chief Financial Officer and     April 27, 2001
--------------------------------------------  Treasurer
John F. Moynahan


/s/ Eugene A. Amobi                           Director                                               April 27, 2001
--------------------------------------------
Eugene A. Amobi


/s/ Keith P. Hicks                            Director                                               April 27, 2001
--------------------------------------------
Keith P. Hicks


/s/ Phillip E. Pearce                         Director                                               April 27, 2001
--------------------------------------------
Phillip E. Pearce


/s/ James J. Ralabate                         Director                                               April 27, 2001
--------------------------------------------
James J. Ralabate


/s/ Lt. Gen. Harry E. Soyster                 Director                                               April 27, 2001
--------------------------------------------
Lt. Gen. Harry E. Soyster


/s/ Kazuyuki Totosato                         Executive Vice President and Director                  April 27, 2001
--------------------------------------------
Kazuyuki Toyosato


/s/ Dr. Edwin Vogt                            Senior Vice President and Director                     April 27, 2001
--------------------------------------------
Dr. Edwin Vogt


/s/ Martin Eric Weisberg, Esq.                Secretary and Director                                 April 27, 2001
--------------------------------------------
Martin Eric Weisberg, Esq
</TABLE>


                                      -24-