SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-QSB

(Mark One)

X           Quarterly  report  pursuant to Section 13 or 15(d) of the Securities
            Exchange Act of 1934 for the  quarterly  period ended  September 30,
            1998 or

 ____       Transition  report pursuant to Section 13 or 15(d) of the Securities
            Exchange    Act    of    1934    for    the    transition     period
            from___________to______________

                         Commission file number: 0-21013

                              XYBERNAUT CORPORATION
             (Exact Name of registrant as specified in its charter)


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

                   12701 Fair Lakes Circle, Fairfax, VA 22033
             (Address of principal executive offices with zip code)

Registrant's telephone number, including area code:          (703) 631-6925

                                       N/A 
(Former  name,  former  address and former  fiscal year,  if changed  since last
report)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 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
                                        --       --

                     APPLICABLE ONLY TO ISSUERS INVOLVED IN
                          BANKRUPTCY PROCEEDINGS DURING
                            THE PRECEDING FIVE YEARS:

Indicate  by check mark  whether  the  registrant  has filed all  documents  and
reports  required  to be  filed by  Section  12,  13 or 15(d) of the  Securities
Exchange Act of 1934 subsequent to the  distribution of securities  under a plan
confirmed by a court.

                                     YES      NO
                                         --       --

                      APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of the latest date.

       Class                                  Outstanding at November 11, 1998
   Common stock - $0.01 par  value                           20,752,729


<PAGE>

                                      INDEX

                                                                        PAGE
                                                                        ----
COVER PAGE                                                                 1

INDEX......................................................................2

PART I - FINANCIAL INFORMATION

         Item 1 - Financial Statements
                   Consolidated Balance Sheets.............................3
                   Consolidated Statements of  Operations..................4
                   Consolidated Statements of Cash Flows...................5
                   Notes to Consolidated  Financial Statements.............6

         Item 2 - Management's Discussion and Analysis of
                   Results of Operations and Financial Conditions..........8

PART II - OTHER INFORMATION

         Item 6 - Exhibits and Reports on Form 8-K........................19

SIGNATURES................................................................20

                                       -2-

<PAGE>

                              XYBERNAUT CORPORATION
                           CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>


                               ASSETS                                 September 30, 1998           December 31,
                                                                          (unaudited)                  1997
                                                                     ---------------------    ----------------------



<S>                                                                  <C>                        <C>                 
Current assets:
   Cash and cash equivalents                                         $             814,266    $              952,366
   Accounts receivable, net                                                        256,729                   216,767
   Inventories, net                                                                741,469                 1,607,781
   Prepaid and other current assets                                                697,152                   334,245
                                                                     ---------------------    ----------------------
         Total current assets                                                    2,509,616                 3,111,159
                                                                     ---------------------    ----------------------

Fixed assets:

   Property and equipment, net                                                     444,482                   505,695
                                                                     ---------------------    ----------------------

Other assets:

   Patent costs, net                                                               490,667                   384,422
   Tooling costs, net                                                              192,248                   376,990
   Other                                                                           190,484                   153,351
                                                                     ---------------------    ----------------------

         Total other assets                                                        873,399                   914,763
                                                                     ---------------------    ----------------------

         Total assets                                                $           3,827,497  $              4,531,617
                                                                     =====================    ======================

                           LIABILITIES AND
                        STOCKHOLDERS' EQUITY

Current liabilities:

   Notes and loans payable                                            $                  -                    19,530
   Accounts payable                                                                201,025                   429,780
     Accrued expenses                                                              931,499                   908,372
     Deferred revenue                                                               12,833                         -
                                                                     ---------------------    ----------------------
         Total current liabilities                                               1,145,357                 1,357,682
                                                                     ---------------------    ----------------------
         Total liabilities                                                       1,145,357                 1,357,682
                                                                     ---------------------    ----------------------



Commitments and contingencies

Stockholders' equity:

   Preferred Stock, $.01 par value,  6,000,000 shares  authorized;  3,000 shares
      designated as Series A, 2,250 shares issued and outstanding as of December
      31,  1997;  4,180 and 3,180  shares  designated  as Series B, 3,180 shares
      issued and  outstanding as of December 31, 1997; 375 shares  designated as
      Series C, 281.25 shares issued and outstanding as of September 30, 1998      273,566                 4,193,355

   Common stock, $.01 par value, 40,000,000 shares authorized;
      20,208,506 and 14,360,515 issued and outstanding as of
      September 30, 1998 and December 31, 1997, respectively                       202,085                   143,605
   Additional paid-in capital                                                   27,732,111                17,181,329
                                                                                         -                   (91,511)   
Deferred compensation
                                                                               (25,525,622)              (18,252,843) 
Accumulated deficit
                                                                     ---------------------    ----------------------  
         Total stockholders' equity                                              2,682,140                 3,173,935
                                                                     ---------------------    ----------------------
         Total liabilities and stockholders' equity                  $           3,827,497     $           4,531,617
                                                                     =====================    ======================
</TABLE>
                                       -3-
<PAGE>



                              XYBERNAUT CORPORATION
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

<TABLE>
<CAPTION>


                                       Three Months Ended September 30,              Nine Months Ended September 30,
                                   -----------------------------------------     ----------------------------------------

                                          1998                   1997                  1998                   1997
                                   ------------------     ------------------     -----------------     ------------------



<S>                                   <C>                     <C>                 <C>                       <C>          
Revenue:
   Product sales and leases           $       259,043         $      129,365      $        615,904          $     349,822          
   Consulting and license                                            227,000                 1,839                257,000
                                   ------------------     ------------------     -----------------     ------------------
       Total revenue                          259,043                356,365               617,743                606,822



Cost of sales                                 794,793                169,588             1,174,269                583,157
                                   ------------------     ------------------     -----------------     ------------------
       Gross profit (loss)                  (535,750)                186,777             (556,526)                 23,665



Operating expenses:

   Sales and marketing                        934,513              1,010,118             2,085,660              2,529,151
   General and administrative               1,181,938                933,128             2,799,817              2,639,263
   Research and development                   851,712                568,058             1,862,481              1,791,680
                                   ------------------     ------------------     -----------------     ------------------

       Total operating expenses             2,968,163              2,511,304             6,747,958              6,960,094
                                   ------------------     ------------------     -----------------     ------------------



       Operating loss                      (3,503,913)            (2,324,527)           (7,304,484)            (6,936,429)         
Other income, net                              23,638                 24,916                31,705                 74,045          
                                   ------------------     ------------------     -----------------     ------------------
Net loss                                  (3,480,275)            (2,299,611)           (7,272,779)            (6,862,384)
                                   ------------------     ------------------     -----------------     ------------------

Provision for preferred stock
      dividends                                 5,469                 37,500                 5,469                 37,500

Provision for accretion on
   preferred stock beneficial                                                                           
   conversion feature                               -                164,634                     -                164,634
                                   ------------------     ------------------     -----------------     ------------------


Net loss applicable to holders of
common stock                                                $ (2,501,745)        $     (7,278,249)       $   (7,064,518)
                                      $   (3,485,744)
                                   ==================     ==================     =================     ==================
Per common share (basic and
diluted):
Net loss before provision for
   preferred stock dividends
   accrued                         $           (0.18)      $       (0.18)       $           (0.43)      $         (0.53)
                                                          
Total provisions for preferred
   stock dividends                                 -               (0.02)                       -                 (0.02)
                                   ------------------     ------------------     -----------------     ------------------

Net loss applicable to holders                                                   
   of common stock                 $           (0.18)      $       (0.20)        $          (0.43)      $         (0.55)
Weighted average number of
common shares outstanding
(basic and diluted)                       19,446,119          12,758,568               16,840,480             12,758,929
                                   ==================     ==================     =================     ==================
</TABLE>


                                       -4-

<PAGE>



                              XYBERNAUT CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOW
                                   (UNAUDITED)
<TABLE>
<CAPTION>



                                                                             Nine Months Ended September 30,
                                                                       --------------------------------------------
                                                                              1998                     1997
                                                                       -------------------     --------------------

<S>                                                                        <C>                     <C>             
Cash flows from operating activities
   Net loss                                                                 $   (7,272,779)         $    (6,862,384)
   Adjustments to reconcile net loss to net cash used in operating activities:
           Depreciation and amortization                                           331,866                  226,223
           Gain on disposal of  property and equipment                              (5,892)                       -
           Provision for write-down of inventory                                   320,000                        -
           Provision for bad debts                                                 (18,697)                       -
           Non cash charges for property and equipment                             233,097
           Non cash charges for tooling costs                                      299,266                        -
           Non cash charges for stock and options issued for services               91,511                        -
   Changes in assets and liabilities:
          Inventories                                                               220,961                (851,159)
          Accounts receivable                                                      (21,265)                 191,475
          Prepaid and other current assets                                        (362,907)                (576,960)
          Other assets                                                             (37,733)                       -
          Accounts payable and accrued expenses                                   (162,879)                 312,582
          Deferred revenue                                                          12,833                 (250,000)
                                                                       -------------------     --------------------
             Net cash used in operating activities                              (6,372,618)              (7,810,223)
                                                                       -------------------     --------------------

Cash flows from investing activities:
   Proceeds from:
         Sale of property and equipment                                             28,312                        -
   Payments for:
         Acquisition of property and equipment                                    (103,750)                (331,896)
         Acquisition of patents and related costs                                 (202,715)                (215,772)
         Capitalization of tooling costs                                          (114,524)                (334,338)
                                                                       -------------------     --------------------
            Net cash used in investing activities                                 (392,677)                (882,006)
                                                                       -------------------     --------------------

Cash flows from financing activities:
   Proceeds from:
           Preferred stock offerings                                             1,348,496                3,000,000
          Common stock offerings                                                 5,307,048
   Payments for:
            Notes and loans                                                        (19,530)                   4,572
            Initial public offering and debenture fees                                   -                  (66,531)
            Other                                                                   (8,819)                       -
            Net cash provided by financing activities                            6,627,195                2,938,041
                                                                       -------------------     --------------------
Net decrease in cash and cash equivalents                                         (138,100)              (5,754,188)
Cash and cash equivalents, beginning of period                                     952,366                6,274,967
Cash and cash equivalents, end of period                                      $    814,266             $    520,779
                                                                       ===================     ====================


Supplemental disclosure of cash flow information:
   Cash paid during the period for interest                                     $    2,526               $    8,527
Supplemental disclosure of non-cash financing activities:
   Common stock issued for preferred stock dividend requirements                $   85,266                   $    -
                                                                                               ====================
   Common stock issued for services rendered                                    $   98,438                   $    -
                                                                                               ====================
   Preferred stock dividends requirements                                       $    5,469                $  37,500
                                                                       ===================     ====================
</TABLE>


                                       -5-

<PAGE>



                   Notes to Consolidated Financial Statements

1.       Basis of Presentation

         We have prepared the  accompanying  unaudited,  consolidated  financial
statements in accordance  with  generally  accepted  accounting  principles  for
interim financial  information and instructions to Form 10-QSB and Rule 10-01 of
Regulation  S-X.  Accordingly,  they do not include all of the  information  and
footnotes  required by generally  accepted  accounting  principles  for complete
financial  statements.  In our opinion,  all  adjustments  (consisting of normal
recurring  accruals)  considered  necessary  for a fair  presentation  have been
reflected in such  financial  statements.  Please refer to our Annual  Report on
Form 10-KSB for the complete financial statements. Results of operations for the
nine months ended September 30, 1998 are not  necessarily  indicative of results
of operations expected for the full year. Our fiscal year ends December 31.

2.       Principles of Consolidation

         The consolidated financial statements include our accounts and those of
our  wholly-owned  subsidiary,   Tech  International  of  Virginia  Inc.  ("Tech
Virginia").   We  have  eliminated  all  material   intercompany   accounts  and
transactions.

3.       New Accounting Pronouncements

         The Financial  Accounting  Standards Board has issued two new standards
that become effective for reporting  periods  beginning after December 15, 1997.
SFAS No. 130, "Reporting Comprehensive Income",  requires additional disclosures
with respect to certain changes in assets and  liabilities  that previously were
not required to be reported as results of  operations  for the period.  SFAS No.
131,  "Disclosures  about  Segments of an Enterprise  and Related  Information",
requires  financial  and  descriptive  information  with  respect to  "operating
segments" of an entity based on the way management  disaggregates the entity for
making  internal  operating  decisions.  There  is no  impact  to our  financial
statements from the adoption of these pronouncements.

         In addition,  the Financial Accounting Standards Board has issued, SFAS
No. 133, "Accounting for Derivative  Instruments and Hedging Activities",  which
becomes effective for years beginning after June 15, 1999. SFAS No. 133 requires
that every  derivative  instrument be recorded in the balance sheet as either an
asset or a liability  measured at its basic value.  The statement  requires that
changes in the derivative's fair value be recognized in earnings unless specific
hedge  criteria  are met. We believe that the effect of the adoption of SFAS No.
133 by us will not be material.


                                       -6-

<PAGE>



4.       Preferred Stock

         In January 1998, we placed 1,000 shares of Series B Preferred Stock and
received  cash  proceeds  of  approximately  $974,000  from  this  issuance.  In
connection  with this  placement  and the  placement of 3,000 shares of Series B
Preferred Stock in November 1997, the placement agent received (1) 50,000 shares
of Common  Stock,  (2)  warrants to purchase  25,000  shares of Common  Stock at
$2.1313 per share, and (3) warrants to purchase 75,000 shares of Common Stock at
$3.025 per share.  During the nine months ended  September 30, 1998, the holders
of the Series A and Series B Preferred  Stock converted 2,250 shares of Series A
Preferred  Stock and 4,180 shares of Series B Preferred  Stock pursuant to their
respective terms. Such conversions  resulted in the issuance of 4,878,074 shares
of Common Stock. As of the current date, the holders of the Preferred Stock have
converted  all of the 3,000 shares of Series A Preferred  Stock and 4,180 shares
of Series B  Preferred  Stock we issued.  Such  conversions  resulted in the the
issuance of 1,958,984 and 3,172,239 shares of Common Stock, respectively.

         In May 1998,  we placed  375  shares  of Series C  Preferred  Stock and
received cash proceeds of $375,000  from this  issuance.  During the nine months
ended  September 30, 1998, the holders of the Series C Preferred Stock converted
93.75 of such shares resulting in the issuance of 23,741 shares of Common Stock.

5.       Commitment

         We entered into a Memorandum of Understanding ("MOU") with Sony Digital
Products  ("SODP") on May 14, 1998.  Under that  agreement,  we are obligated to
reimburse  SODP Yen 100 million over a ten month period  commencing  April 1998.
These payments are reimbursements to SODP for engineering and development of our
Mobile Assistant IV(TM). Through September 1998, we have remitted to SODP Yen 40
million under the MOU in accordance  with the payment  terms.  We will remit the
balance of the payments and  recognize  the related  expense as the services are
provided to us by SODP.

6.       Subsequent Events

         In October 1998, we entered into a financing agreement with an investor
pursuant to which, we may, at our option, sell between $2,700,000 and $5,400,000
of Common  Stock to the  investor  during  the  period  from  October 8, 1998 to
November 15, 1998.  As of November 13, 1998,  we have issued  488,343  shares of
unregistered  Common Stock under that financing agreement from which we received
$2,000,000 in gross proceeds.  In connection with such financing  agreement,  we
also issued warrants to purchase up to 12,500 shares of stock at $9.58 per share
and 12,500 shares of stock at $9.09 per share. Those warrants are exercisable at
any time  starting  six months  after the  closing  and ending  five years after
closing. The placement agent for this transaction received a cash fee of 6%.

                                       -7-

<PAGE>



ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION.

                                    Overview

         Our Company was  incorporated as a Virginia company in October 1990 and
commenced  active  operations in November 1992 as Computer  Products & Services,
Inc. to develop, manufacture and sell mobile computing systems. Since commencing
operations,  we have incurred  significant  operating  losses. In April 1996, we
merged with Xybernaut  Corporation,  a Delaware corporation,  in order to change
our name and reincorporate in Delaware. In July 1996, we successfully  completed
an initial  public  offering  ("IPO") of our Common Stock and Warrants which are
traded on the NASDAQ SmallCap Market.

      The first product we commercialized was the proprietary  portable computer
technology and related software applications embodied in its Mobile Assistant(R)
Series.  The first product in this series was  introduced in 1994 and used "486"
based  technology  ("486 System") that was produced in a limited quantity and is
no longer  being  manufactured.  We have based our  product  development  on the
expectation  that  continued  improvements  in software for  operating  systems,
applications and speech recognition software will require continued improvements
in the performance and capabilities of the Mobile Assistant(R)  Series. Based on
this expectation,  we undertook a product  development  program that resulted in
the second product  offering in the Mobile  Assistant(R)  Series.  We introduced
this  product,  which uses  "586"  based  technology  ("Mobile  Assistant(R)  II
System"),  on a preproduction basis in January 1997. During the third quarter of
1997 we introduced a third system which uses a Pentium(R)  processor  running at
133 MHZ ("133P  System").  We tailored the 133P System for those  customers  who
require  additional  processing  capacity  for  their  applications,  such  as a
body-worn  server for wireless LAN  applications,  and also for those  customers
using new continuous speech  recognition or phonetic  recognition  software that
require higher processing  speeds,  such as that available from IBM Corporation,
Dragon Systems, Inc., and Texas Instruments,  among others. In the third quarter
of 1998, we commenced  production of the  next-generation  MMX Pentium(R) Mobile
Assistant(R) IV ("MA IV"), which uses a Pentium chipset known as the "Tillamook"
that runs at up to 266 MHZ.

        We are  developing  additional  software  products for use on the Mobile
Assistant  and other  personal  computers.  In the  third  quarter  of 1997,  we
announced the introduction of linkAssist(TM),  a software product which provides
a "windows"  style  graphical user interface with speech  navigation that allows
data  stored  in almost  any  format,  such as  commonly-used  word  processing,
spreadsheet,  data  base,  graphics  or media  files,  to be  linked to most any
application   without  altering  the  original  data.  We  have  also  announced
webAssist(TM),  a software product that allows voice navigation of HTML document
links such as those found on the World Wide Web and Intranets.

         We have  derived  our  revenues  from sales of the Mobile  Assistant(R)
Series  and  from  consulting  services  related  to  the  Mobile  Assistant(R),
application software for the Mobile Assistant(R),  and other computer platforms.
During the three months ended September 30, 1998, we derived all of our

                                       -8-

<PAGE>



revenues  from  sales of the Mobile  Assistant(R).  For the three  months  ended
September 30, 1997, we derived  approximately  36% of our revenues from sales of
the Mobile  Assistant(R)  and 64% of our revenues from  consulting  services and
licensing revenues.  In the future, we expect to derive additional revenues from
the  sale  of  software  and  additional   optional  components  of  the  Mobile
Assistant(R) Series.

         We  recognize  revenues  from  sales to  customers,  VARs and OEMs when
products  are  shipped.  Our  sales  agreements  generally  do not  involve  any
significant  obligations to customers  subsequent to delivery except as provided
in separate  service or support  agreements.  We will  recognize  revenues  from
future software sales in accordance with Statement of Position No. 97-2. Cost of
sales include the cost of components for the Mobile Assistant(R) Series,  direct
labor, direct materials,  overhead allocations,  inventory obsolescence charges,
amortization of tooling costs and shipping costs.

         We intend to continue  expenditures  on  research  and  development  of
additional hardware and software products.  Research and development  activities
consist  primarily  of  personnel  engaged  in the  research  and  design of new
products,  test  components,  consulting  fees and equipment  costs  required to
conduct our development  activities.  Software development costs are expensed as
incurred until  technological  feasibility  is  established  in accordance  with
Statement of Financial  Accounting Standards No. 86 (SFAS No. 86, Accounting for
the Costs of Computer Software to be Sold, Leased or Otherwise Marketed),  after
which any  additional  costs are  capitalized  until the  software  is ready for
release. We started limited shipments of our linkAssist(TM) software late in the
year ended December 31, 1997, but the costs  eligible for  capitalization  under
SFAS were immaterial during this period and were not capitalized. We expect such
costs to be immaterial  during the coming fiscal year.  Research and development
expenses for the three months ended  September  30, 1998 and 1997 were  $851,712
and $568,058, respectively, none of which was capitalized.

         Our  consolidated  financial  statements,  for all  periods  presented,
include the results of operations of Tech Virginia, our wholly-owned  subsidiary
that supplies  software and consulting  services to the United States government
and others. In July 1996, we exercised our option to purchase all of the capital
stock of Tech Virginia.  We completed payments under this option during the year
ended  December  31,  1997.  The  consolidated   financial   statements  contain
eliminations for all material transactions between Tech Virginia and our company
for all periods presented.

         Our  consolidated  financial  statements do not contain a provision for
income tax expense due to the net operating  losses  incurred  since  inception.
Subject to realization,  we have generated net operating losses that can be used
to offset taxable  operating  income in the future.  Our future  operations,  if
profitable,  will be subject to income tax expense not previously  incurred.  At
September 30, 1998, we had approximately $14,900,000 of net operating loss carry
forwards for federal income tax purposes that expire  beginning in 2013. The use
of these carry  forwards may be limited in any one year under  Internal  Revenue
Code Section 382 if significant ownership changes occur.

                                       -9-

<PAGE>



         The Year 2000 Issue is the result of computer  programs  being  written
using two digits  rather  than four to define the  applicable  year.  Any of our
computer programs that have  date-sensitive  software may recognize a date using
"00" as the year 1900 rather than the year 2000.  This could  result in a system
failure or miscalculations causing disruptions of operations,  including,  among
other things, a temporary inability to process  transactions,  send invoices, or
engage in similar normal business activities.

         Based on a recent assessment, we determined that we will be required to
modify or replace  portions of our  software so that our  computer  systems will
properly utilize dates beyond December 31, 1999. We believe that we can mitigate
the Year 2000 Issue with  modifications to existing  software and conversions to
new software. However, if we fail to make such modifications and conversions, or
if we do not make them on a timely  basis,  the Year  2000  Issue  could  have a
material impact on our operations.

         We have contacted all of our significant  suppliers and large customers
to determine the possible effect on our operations of their inability or failure
to remediate  their own Year 2000 Issue.  Our estimate of the costs to remediate
our Year 2000 issue is based on presently  available  information.  However,  we
cannot  guarantee that the systems of other  companies on which our systems rely
will be timely converted,  or that a failure to convert by another company, or a
conversion  that is  incompatible  with our  systems,  would  not have  material
adverse effect on our operations.  We have no exposure to contingencies  related
to the Year 2000 Issue for the products we have sold.

         We will utilize both internal and external  resources to reprogram,  or
replace, and test the software for Year 2000 modifications.  We plan to complete
the Year 2000 project within six months and estimate the total remaining cost of
the Year 2000 project at $6,000.  Approximately $1,700 of the total project cost
is attributable  to the purchase of new software which will be capitalized.  The
remaining  $4,300,  which will be expensed as incurred over the next six months,
is not expected to have a material effect on our results of operations. To date,
we have  incurred and  expensed  approximately  $1,000  related to our Year 2000
project.

         Our  estimates  of the date of  completion  and  cost of our Year  2000
project are based on our best  estimates,  which we derived  utilizing  numerous
assumptions  of future events  including the continued  availability  of certain
resources,  third  party  modification  plans and other  factors.  The costs and
completion  date of our Year  2000  project  could  differ  materially  from our
estimates due to the lack of availability and cost of personnel  trained in this
area, our ability to locate and correct all relevant computer codes, and similar
uncertainties.

                                      -10-

<PAGE>



Results of Operations

         The following table sets forth items from the  Consolidated  Statements
of Operations as a percentage of revenues:
<TABLE>
<CAPTION>



                                          Three Months Ended                        Nine Months Ended


                                      9/30/98             9/30/97             9/30/98              9/30/97
                                 -----------------    ---------------     ----------------     ----------------
<S>                                         <C>                <C>                  <C>                  <C>   
Revenues                                    100.0%             100.0%               100.0%               100.0%
Cost of sales                               306.8%              47.6%               190.1%                96.1%
                                 -----------------    ---------------     ----------------     ----------------
   Gross margin                            (206.8)%             52.4%               (90.1)%                3.9%

Operating expenses:
   Sales & marketing                        360.7%             283.5%               337.6%               416.8%
   General & administrative                 456.3%             261.8%               453.2%               434.9%
   Research & development                   328.8%             159.4%               301.5%               295.3%
                                 -----------------    ---------------     ----------------     ----------------
Total operating expense                   1,145.8%             704.7%             1,092.3%             1,147.0%
Other income                                  9.1%               7.0%                 5.1%                12.2%
                                 -----------------    ---------------     ----------------     ----------------
Net loss                                 (1,343.5%)           (645.3%)           (1,177.3%)           (1,130.9%)
                                 -----------------    ---------------     ----------------     ----------------
Provisions for preferred stock                2.1%              56.7%                 0.9%                33.3%
                                 -----------------    ---------------     ----------------     ----------------
Net loss applicable to holders
of common stock                          (1,345.6%)           (702.0%)           (1,178.2%)            1,164.2%)
                                 =================    ================    ================     =================
</TABLE>

THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997

         Revenues.  Total revenues for the three months ended September 30, 1998
were  $259,043,  a decrease of  $97,322,  or 27%,  compared to $356,365  for the
corresponding  period  in 1997.  Product  revenues  for the three  months  ended
September 30, 1998 were $259,043,  an increase of $129,678 or 100%,  compared to
$129,365 for the corresponding  period in 1997. The increase in product revenues
for the three months ended  September  30, 1998 was related to the higher number
of 133P Systems that were sold during that period compared to the  corresponding
period in 1997.  There was no  consulting  and  license  revenues  for the three
months  ended  September  30, 1998  compared to $227,000  for the  corresponding
period in 1997.  In 1997 we  recognized  licensing  revenue  of  $210,000.  This
represented the remaining  balance of deferred  licensing  revenue with Rockwell
International,  one of  our  licensees.  Revenue  recognition  resulted  because
Rockwell  International  elected  to  discontinue  operating  under our  license
agreement due to a restructuring of their business operations.

         Cost of  sales.  The cost of  goods  sold for the  three  months  ended
September 30, 1998 was $794,793,  an increase of $625,205,  or 369%, compared to
$169,588 for the  corresponding  period in 1997. The increase was due to charges
of  approximately  $320,000 to reduce the carrying  value of the 133P Systems to
estimated  market value and  approximately  $160,000 related to the write-off of
certain  capitalized  tooling costs  related to the 133P Systems in 1998.  These
reductions  were based on our  recognition  that the MA IV System will supercede
the 133P System resulting in the need to recognize obsolescence  associated with
the older line.

                                      -11-

<PAGE>



         Sales and marketing.  Sales and marketing expenses for the three months
ended September 30, 1998 were $934,513,  a decrease of $75,605,  or 7%, compared
to $1,010,118  for the  corresponding  period in 1997. The decrease was due to a
change in the compensation  structure for sales personnel that resulted in lower
base  salaries  and  a  reduction  in  travel   related   expenses  due  to  the
centralization of sales staff.

         General and administrative. General and administrative expenses for the
three months ended September 30, 1998 were $1,181,938,  an increase of $248,810,
or 27%,  compared  with  $933,128  for the  corresponding  period in 1997.  This
increase resulted  primarily from a charge of approximately  $230,000 related to
the  write-off  of  software  that had no  further  remaining  value to us.  The
remaining  increase is due activities  related to discussions  regarding certain
strategic partnerships and international operations.

         Research and  development.  Research and  development  expenses for the
three months ended September 30, 1998 were $851,712, an increase of $283,654, or
50%, compared with $568,058 for the corresponding  period in 1997. This increase
is  primarily  the  result of  increased  development  expenses  for the  Mobile
Assistant(R) IV System.

         Other income,  net.  Other income for the three months ended  September
30, 1998 was $23,638, a decrease of $1,278, or 5%, compared with $24,916 for the
corresponding period in 1997.

         Dividend on preferred stock, and deemed dividend accretion on preferred
stock.  We issued our Series A Preferred  Stock on June 30,  1997.  The Series A
Preferred Stock accrued  dividends at 5% per annum on the outstanding  principal
amount.  We issued our Series B Preferred Stock on November 11, 1997. The Series
B Preferred Stock accrued dividends at 4% per annum on the outstanding principal
amount.  We issued our Series C Preferred  Stock on May 15,  1998.  The Series C
Preferred Stock accrues  dividends at 5% per annum on the outstanding  principal
amount.  For the three months ended  September  30, 1998,  the amount of accrued
dividend was $5,469, a decrease of $32,031, or 85% for the corresponding  period
in 1997.  In  accordance  with the  Emerging  Issues  Task Force  report  titled
"Accounting for the Issuance of Convertible  Preferred Stock and Debt Securities
with a Nondetachable  Conversion Feature," a deemed dividend was assumed for the
Series A and  Series B  Preferred  Stock,  which was  accreted  periodically  as
portions of the Series A and Series B Preferred Stock were converted into Common
Stock.  The amount of this  accretion  for the three months ended  September 30,
1998 was $0 a  decrease  of  $164,634  or 100%,  compared  to  $164,634  for the
corresponding  period in 1997.  Additional  paid in capital  was  reduced by the
amount  of  accretion  and  preferred  stock  was  increased  by the  amount  of
accretion, resulting in no impact on the overall amount of stockholder's equity.

         Net loss  attributable  to holders of common stock.  As a result of the
factors described above, the net loss attributable to Common Stock for the three
months ended September 30, 1998 was $3,485,744, an increase of $983,999, or 39%,
compared to $2,501,745 for the  corresponding  period in 1997.  Although we were
subject to taxation during the three months ended September 30,

                                      -12-

<PAGE>



1998 and 1997,  we incurred net losses during these periods and no provision for
income taxes was made.

NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997

         Revenues.  Total revenues for the nine months ended  September 30, 1998
were  $617,743,  an  increase of $10,921,  or 2%,  compared to $606,822  for the
corresponding  period  in  1997.  Product  revenues  for the nine  months  ended
September 30, 1998 were $615,904,  an increase of $266,082,  or 76%, compared to
$349,822 for the corresponding  period in 1997. The increase in product revenues
for the nine months ended September 30, 1998 was related to the higher number of
133P Systems that were sold during that period,  compared to the lower number of
486, 586 and 133P Systems  that were sold in the  corresponding  period in 1997.
Consulting  and license  revenues for the nine months ended  September  30, 1998
were  $1,839 a  decrease  of  $255,161  or 99%,  compared  to  $257,000  for the
corresponding  period  in  1997.  In 1997 we  recognized  licensing  revenue  of
$210,000.  This represented the remaining balance of deferred  licensing revenue
with Rockwell International,  one of our licensees. Revenue recognition resulted
because  Rockwell  International  elected  to  discontinue  operating  under our
license agreement due to a restructuring of their business operations.

         Cost of  sales.  The cost of  goods  sold  for the  nine  months  ended
September 30, 1998 was $1,174,269,  a increase of $591,112, or 101%, compared to
$583,157 for the  corresponding  period in 1997. The increase was due to charges
of  approximately  $320,000 to reduce the carrying  value of the 133P Systems to
estimated  market value and  approximately  $160,000 related to the write-off of
certain  capitalized  tooling costs  related to the 133P Systems in 1998.  These
reductions  were based on our  recognition  that the MA IV System will supercede
the 133P System resulting in the need to recognize obsolescence  associated with
the older line. The remaining  increase was due to increased  sales.  These were
offset by non-recurring  charges in 1997 of  approximately  $97,000 of parts for
586 Systems  that were  replaced  and  written  off,  and by a full  reserve for
obsolescence of approximately $225,000 for the remaining computing units used in
486 Systems that we believed to be saleable,  but whose value is uncertain given
changes in technology and advances in the market.

         Sales and marketing expenses. Sales and marketing expenses for the nine
months ended September 30, 1998 were $2,085,660, a decrease of $443,491, or 18%,
compared to $2,529,151 for the  corresponding  period in 1997. This decrease was
due to a change in the compensation  structure for sales personnel that resulted
in lower base  salaries  and a reduction in travel  related  expenses due to the
centralization of sales staff.

         General  and  administrative   expenses.   General  and  administrative
expenses  for the nine  months  ended  September  30, 1998 were  $2,799,817,  an
increase of $160,554, or 6%, compared to $2,639,263 for the corresponding period
in  1997.  This  increase  resulted  primarily  from a charge  of  approximately
$230,000  related to the  write-off  of software  that had no further  remaining
value to us. The remaining  increase is due to activities related to discussions
regarding certain strategic

                                      -13-

<PAGE>



partnerships and  international  operations.  These were offset by reductions in
personnel  and  related  occupancy  expenses,  along with a decrease  in related
travel expenses.

         Research and development  expenses.  Research and development  expenses
for the nine months ended  September  30, 1998 were  $1,862,481,  an increase of
$70,801,  or 4%,  compared to $1,791,680 for the  corresponding  period in 1997.
This increase is the primarily the result of increased  development expenses for
the Mobile Assistant IV System.

         Other income, net. Other income for the nine months ended September 30,
1998 was  $31,704,  a decrease of $42,341,  or 57%,  compared to $74,045 for the
corresponding  period in 1997.  This decrease is the result of reduced  interest
income from the lower average cash  balances in the nine months ended  September
30, 1998 than for the corresponding period in 1997, which reflected the interest
income on proceeds from the Company's initial public offering that was completed
in July 1996.

         Dividend on preferred stock, and deemed dividend accretion on preferred
stock.  We issued our Series A Preferred  Stock on June 30,  1997.  The Series A
Preferred Stock accrued  dividends at 5% per annum on the outstanding  principal
amount.  We issued our Series B Preferred Stock on November 11, 1997. The Series
B Preferred Stock accrued dividends at 4% per annum on the outstanding principal
amount.  We issued our Series C Preferred  Stock on May 15,  1998.  The Series C
Preferred Stock accrues  dividends at 5% per annum on the outstanding  principal
amount.  For the nine months ended  September  30,  1998,  the amount of accrued
dividend was $5,469, a decrease of $32,031, or 85% for the corresponding  period
in 1997.  In  accordance  with the  Emerging  Issues  Task Force  report  titled
"Accounting for the Issuance of Convertible  Preferred Stock and Debt Securities
with a Nondetachable  Conversion Feature," a deemed dividend was assumed for the
Series A and  Series B  Preferred  Stock,  which was  accreted  periodically  as
portions of the Series A and Series B Preferred Stock were converted into Common
Stock. The amount of this accretion for the nine months ended September 30, 1998
was  $0  a  decrease  of  $164,634  or  100%,   compared  to  $164,634  for  the
corresponding  period in 1997.  Additional  paid in capital  was  reduced by the
amount  of  accretion  and  preferred  stock  was  increased  by the  amount  of
accretion, resulting in no impact on the overall amount of stockholder's equity.

         Net loss  attributable  to holders of common stock.  As a result of the
factors  described  above,  the net loss for the nine months ended September 30,
1998 was $7,278,249,  an increase of $213,731,  or 3% compared to $7,064,518 for
the  corresponding  period in 1997.  Although we were subject to taxation during
the nine months ended September 30, 1998 and 1997, we incurred net losses during
these periods and no provision for taxes was made.

Liquidity and Capital Resources

         Since  our  inception  until  the  completion  of  our  initial  public
offering,  we  have  financed  our  operations  from  the  private  sale  of our
securities,   from  vendor  credit  and  from  short-term  loans  received  from
management, stockholders and others.

                                      -14-

<PAGE>




         From October 1994 to August 1995,  we raised  approximately  $1,243,000
from the private sale of shares of Common Stock at $6.00 per share.  In November
1995,  we  raised  $1,505,000  through  the  private  placement  of  convertible
debentures  and in April 1996,  we raised  $1,000,000  through a second  private
placement of convertible debentures.  We received approximately  $2,140,000 from
these financings net of offering costs. We carried the placement fees in respect
of these financings as  interest-bearing  loans that we repaid from the proceeds
of our initial public  offering.  We realized  gross  proceeds of  approximately
$13,280,000  and  net  proceeds  of  approximately   $10,840,000  after  related
expenses.

         On June 30, 1997, we completed a $3 million private  placement of 3,180
shares of  Series A  Preferred  Stock,  par value  $0.01  per share  ("Series  A
Preferred  Stock"),  from which we realized gross proceeds of $3,000,000 and net
proceeds of approximately  $2,762,000 after related expenses. The holders of the
Series A Preferred Stock converted all of such shares  resulting in the issuance
of 1,958,984 shares of Common Stock.

         On November 12, 1997,  we completed a $3 million  private  placement of
3,000 shares of Series B Preferred  Stock,  par value $0.01 per share ("Series B
Preferred  Stock"),  from which we realized gross proceeds of $3,180,000 and net
proceeds of  approximately  $2,950,000 after related  expenses.  On February 23,
1998,  we  completed  a  follow-on  placement  of Series B  Preferred  Stock and
realized gross proceeds of $1,000,000 and net proceeds of approximately $990,000
after related  expenses.  The holders of the Series B Preferred  Stock converted
all of such  shares  resulting  in the  issuance of  3,172,239  shares of Common
Stock.

         In April 1998, we entered into an equity line of credit  agreement from
which we received an initial  gross amount of  $1,000,000 in exchange for Common
Stock. Under this line of equity, we have the right, but not the obligation,  to
obtain up to an additional  $10,000,000 in a series of equity drawdowns based on
terms and conditions  specified in the line of credit.  In connection  with this
line of equity, we issued five-year  warrants to purchase up to 40,000 shares of
stock at $1.76 per share  and  20,000  shares of stock at $2.81 per share at any
time starting six months after closing. The placement agent for this transaction
received a cash fee of 5% and 50,000 shares of unregistered stock.

         In May 1998, we completed a $750,000 private placement of 375 shares of
Series C Preferred Stock, par value $0.01 per share ("Series C Preferred Stock")
and 110,294  shares of Common Stock.  The Series C Preferred  Stock has a stated
value of $1,000 per share. A holder of the Series C Preferred  Stock is entitled
to receive, if and when declared, a dividend equal to 5% of the stated value per
share per annum,  payable  in shares of Common  Stock or in cash,  payable  upon
conversion of the Series C Preferred  Stock.  The  Certificate of Designation of
the Series C Preferred  Stock  provides us with several  redemption  options and
allows for the periodic  conversion of portions of unredeemed Series C Preferred
Stock over a two-year  period  ending May 15, 2000.  The holders of the Series C
Preferred Stock have converted 93.75 of such shares resulting in the issuance of
23,741 shares of

                                      -15-

<PAGE>



Common Stock.  Any Series C Preferred Stock  outstanding on May 15, 2000 must be
converted into Common Stock at that date.

         In June 1998, we completed a $1,000,000  private  placement in which we
issued  153,846  unregistered  shares  of  Common  Stock at a price of $6.50 per
share.

         In June 1998,  we amended and  exercised a put option in the  aggregate
principal  amount of  $3,000,000  under the April 1998  private  equity  line of
credit  agreement  mentioned  above. In connection  with such action,  we issued
545,454  shares of Common  Stock.  Such  shares are subject to  restrictions  on
resale for a period of nine months and to repricing upon  occurrences of certain
conditions.  In addition, we issued five-year warrants to purchase up to 300,000
shares of Common Stock at a price of $5.25 per share.

         In  September  1998,  we entered into a financing  arrangement  with an
investor  pursuant to which,  we may, at our option,  sell up to  $31,200,000 of
Common Stock to the  investor  during a twelve  month  period.  The investor may
exercise a call option for an  additional  $31,200,000.  In order to utilize the
financing arrangement, we must have an effective registration statement covering
the  shares  to be issued in the  financing.  On  October  1,  1998,  we filed a
registration  statement  covering  a portion of the  shares  issuable  under the
financing.

         In October 1998, we entered into a financing agreement with an investor
pursuant to which, we may, at our option, sell between $2,700,000 and $5,400,000
of Common  Stock to the  investor  during  the  period  from  October 8, 1998 to
November 15, 1998. We have issued  488,343 shares of  unregistered  Common Stock
under this financing  agreement from which we have received  $1,100,000 in gross
proceeds.

         We used cash of  $6,372,618 in our  operating  activities  for the nine
months ended  September  30,  1998.  This amount was  primarily  the result of a
$7,272,780 net loss, an increase in prepaid  expenses of $362,907 and a decrease
in  accounts  payable and accrued  expenses  of  $162,879.  These were offset by
depreciation and amortization of $331,866,  a non-cash charge for the write-down
of  inventory  of $320,000,  a non-cash  charge for  property  and  equipment of
$233,097, a non-cash charge for tooling costs of $299,266, and a net decrease in
inventories  of $220,961.  We used cash of $392,677 in our investing  activities
for the nine months ended September 30, 1998 which included  $202,715 related to
patents,  $114,524 in capitalized tooling costs and $103,750 for the acquisition
of property and equipment. We received proceeds of $6,627,195 from our financing
activities  for the  nine  months  ended  September  30,  1998  which  primarily
consisted of $5,307,048  from our issuance of Common Stock,  net of related fees
and $1,348,496 from our issuance of Series B and Series C Preferred  Stock,  net
of related fees. As a result cash and cash  equivalents  on hand as of September
30, 1998 were  $814,266,  a decrease of $138,100  from the  $952,366 of cash and
cash equivalents on hand as of December 31, 1997.

         We used cash of  $7,810,233 in our  operating  activities  for the nine
months ended  September  30,  1997.  This amount was  primarily  the result of a
$6,862,384 net loss, an increase in inventories

                                      -16-

<PAGE>



of $851,159 largely related to the production of the Mobile Assistant II System,
the 133P System and our head mounted  display,  an increase in prepaid and other
current  assets of $576,960 and the reduction in deferred  licensing  revenue of
$250,000.  These  were  offset  by  depreciation  and  amortization  expense  of
$226,223, a reduction in receivables of $191,475 and an increase of payables and
accrued  expenses  of  $312,582.  We used  cash  of  $882,006  in our  investing
activities for the nine months ended September 30, 1997. This included  $331,896
for the  acquisition  of property and equipment,  $334,338 in capitalized  costs
related to the production of the Mobile Assistant II System, the 133P System and
our head mounted display,  and $215,772 related to patents. We received proceeds
of $2,938,041 from our financing  activities for the nine months ended September
30, 1998 from the  placement of our Series A Preferred  Stock.  As a result cash
and cash equivalents on hand as of September 30, 1997 were $520,779,  a decrease
of $5,754,188  from the  $6,274,967 of cash and cash  equivalents  on hand as of
December 31, 1996.

         At  September  30, 1998,  we had no material  capital  commitments  and
working capital of $1,364,259.

         We  anticipate  that our working  capital  requirements  and  operating
expenses  will  increase  as we  expand  production  and  sales  of  the  Mobile
Assistant(R),  and expand our full sales, service and marketing  functions,  and
develop the support structure for these  activities.  The timing of increases in
personnel  and  other  expenses,  the  amount of  working  capital  consumed  by
operations,  marketing  and  rollout  expenses  for the MA IV,  and  competitive
pressures on gross  margins will impact the magnitude and timing of the our cash
requirements.  To meet  working  capital  needs,  we  entered  into a  financing
arrangement  with an  investor.  In the  event  such  financing  arrangement  is
terminated, we may also exercise an existing put option to sell up to $7,000,000
of Common Stock under the April 1998 Private Equity Line of Credit Agreement. In
addition,  we intend  to use funds  from  operations,  and may  obtain a working
capital line of credit and/or complete additional financings,  if necessary.  We
believe that additional funding arrangements are readily available to us and the
execution of any such arrangement will depend on timing,  market  conditions and
the  final  terms  and  conditions  of such  arrangements.  We will  begin  full
production  of the MA IV  model  of the  Mobile  Assistant(R)  beginning  in the
quarter ending December 31, 1998 and expect  receivables from sales of the MA IV
to provide  collateral for borrowing  facilities at that point.  Although we can
provide no assurance that such facilities  will be available,  we intend to seek
to establish secured borrowing facilities at such time as appropriate collateral
is available.  We believe that the  combination of cash on hand,  operating cash
flow,  and outside  funding will provide  sufficient  liquidity to meet our cash
requirements until at least September 1999. However, we can provide no assurance
that we can or will obtain  sufficient  funds from  operations or from a working
capital line of credit or from closing additional financings on terms acceptable
to us.

                      Possible Impact on Near-Term Revenues

         We have agreements with third-party suppliers to manufacture and supply
the body-worn  computing unit, the HMD and the batteries for the 133P and the MA
IV. We have  substantially  curtailed  production of the computing  unit for the
133P pending the introduction of the MA IV in

                                      -17-

<PAGE>



the fourth  quarter.  As expected,  revenue growth has been modest for the first
three quarters of the year ending December 31, 1998.  Significant revenue growth
is expected  in the fourth  quarter  when MA IV  suppliers  commence  full scale
production and those units are sold in volume.  Delays,  for any reason,  in the
commencement  of full-scale  production of the MA IV units may adversely  affect
revenues for the year ending December 31, 1998.

         Exchange rates for some local  currencies in countries where we operate
may  fluctuate in relation to the U.S.  dollar.  Such  fluctuations  may have an
adverse effect on our earnings when local  currencies  are translated  into U.S.
dollars.

                         Possible Non-Cash Future Charge

         As  a  condition  to  our  initial  public  offering,  certain  of  our
stockholders,  primarily  officers  and  directors,  deposited  an  aggregate of
1,800,000 shares of Common Stock into an escrow account (the "Escrowed Shares").
The Escrowed Shares are subject to the following terms and conditions:

         o        The  Escrowed  Shares  will be released  incrementally  over a
                  three-year  period  only in the event our gross  revenues  and
                  earnings  (loss)  per share for the  12-month  periods  ending
                  September  30,  1997,  1998 and 1999  equal or exceed  certain
                  gross revenue and earnings (loss) per share targets.

         o        If such per share  targets are not met in any of the  relevant
                  12-month  periods  and the price of the Common  Stock does not
                  meet or exceed  agreed upon price levels,  certain  amounts of
                  the Escrowed Shares will be returned to us for each period and
                  canceled.

         o        All the Escrowed  Shares will be returned to the  stockholders
                  if the  closing  price of the Common  Stock as reported on The
                  Nasdaq  SmallCap  Market  following  this  offering  equals or
                  exceeds $11.00 for 25 consecutive trading days or 30 out of 35
                  consecutive  trading days during the period  ending  September
                  30, 1999.

         The difference  between the initial offering price and the market value
(at the time of release) of any Escrowed Shares released will be deemed to be an
additional compensation expense. Such expense, depending on the price per share,
may have the effect of reducing or eliminating  any earnings per share and could
have a negative effect on the market price for our Common Stock.

         We did not meet the targets for escrow  release for  September 30, 1997
and September 30, 1998. As a result,  300,000 and 750,000 shares,  respectively,
were canceled from the escrow pool  resulting in a reduction of 2.1% and 3.6% of
our outstanding shares of Common Stock.

         Since we have reported  losses,  our loss per share is calculated using
outstanding shares less shares held in escrow to avoid antidilution.  Therefore,
the  cancellation  of shares from escrow does not affect the  reported  loss per
share.

                                      -18-

<PAGE>



         Certain  statements  in  the  foregoing  Management's   Discussion  and
Analysis (the "MD&A") are not historical  facts or information and certain other
statements in the MD&A are forward-looking  statements within the meaning of The
Private  Securities  Litigation  Reform Act of 1995 (the "Act").  In particular,
when used in the preceding discussion, the words "believes,  expects, or intends
to" and similar conditional expressions are intended to identify forward-looking
statements  within  the  meaning of the Act and are  subject to the safe  harbor
created  by  the  Act.  Such   statements  are  subject  to  certain  risks  and
uncertainties and actual results could differ materially from those expressed in
any of the forward-looking statements. Such risks and uncertainties include, but
are not limited to,  conditions  in the general  acceptance  of our products and
technologies,   competitive  factors,  the  ability  to  successfully   complete
additional financings and other risks described in our SEC reports and filings.

                                      -19-

<PAGE>



PART II - OTHER INFORMATION

ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K

a)       EXHIBITS:

         27.1     Financial Data Schedule

b)       REPORTS ON FORM 8-K

         No reports on form 8-K were filed  during the  quarterly  period  ended
September 30, 1998.

                                      -20-

<PAGE>



                                   SIGNATURES

         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
the  registrant  has duly  caused  this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                                       XYBERNAUT CORPORATION


                                                      /s/ Maarten R. Heybroek  
                                                         -----------------------
                                                     By: Maarten R. Heybroek
                                                     Chief Operating Officer and
                                                     Chief Financial Officer

                                      -21-