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UNITED STATESSECURITIES AND EXCHANGE COMMISSION  ______________________ FORM 10-QSB ______________________
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended December 31, 2004 o
    
    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: 0-50775 XENONICS HOLDINGS, INC.  ______________________
 Nevada
    
    84-1433854(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification Number)2236 Rutherford Road, Suite 123Carlsbad, California
    
    92008-7297(Address of principal executive offices)
    
    (Zip Code)
 Issuers telephone number: (760) 438-4004 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 issuer was required to
file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes þ No  ̈ As of January 31, 2005, the registrant had outstanding 14,864,878 shares of its $.001 par value
Common Stock. Transitional Small Business
Disclosure Format: Yes  ̈ No þ   1




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TABLE OF CONTENTS PART I. FINANCIAL INFORMATIONItem 1. Financial StatementsCondensed Consolidated Balance Sheets as of December 31, 2004 (unaudited) and September 30, 2004
    
    
    1Condensed
Consolidated Statements of Operations for the Three Months ended December 31, 2004 and 2003 (unaudited)
    
    
    2Condensed Consolidated Statements of Cash Flows for the Three Months ended December 31, 2004 and 2003 (unaudited)
    
    
    3Notes to Condensed Consolidated Financial Statements (unaudited)
    
    
    4Item 2. Managements Discussion and Analysis or Plan of Operation
    
    
    9Item 3. Controls and Procedures
    
    
    12PART II. OTHER INFORMATIONItem 1. Litigation
    
    
    14Item 2. Unregistered Sales of Equity Securities, Use of Proceeds and Small Business Issuer Purchases of Equity Securities
    
    
    14Item 5. Other Information
    
    
    15Item 6. Exhibits
    
    
    15SIGNATURE PAGE
    
    
    16EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1
  i




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PART I. FINANCIAL INFORMATION 
 ITEM 1. Financial Statements 
 CONDENSED CONSOLIDATED BALANCE SHEETS December 31,
    
    
    September 30,2004
    
    
    2004$ in thousands, except share amounts
    
    (unaudited)AssetsCurrent assets:Cash
    
    $
    853
    
    
    $
    3,269Accounts receivable, net of allowance for doubtful accounts of $0
    
    
    620
    
    
    
    253Inventories, net
    
    
    2,403
    
    
    
    922Deferred tax asset
    
    
    230
    
    
    
    Deferred offering costs
    
    
    55
    
    
    
    Other current assets
    
    
    148
    
    
    
    189Total Current Assets
    
    
    4,309
    
    
    
    4,633Equipment, furniture and fixtures at cost, less accumulated
depreciation of $62 and $59
    
    
    41
    
    
    
    35Other non-current assets
    
    
    25
    
    
    
    24Total Assets
    
    $
    4,375
    
    
    $
    4,692Liabilities and Shareholders EquityCurrent liabilities:Accounts payable
    
    $
    964
    
    
    $
    1,126Accrued royalty
    
    
    
    
    
    
    400Accrued payroll and related taxes
    
    
    104
    
    
    
    93Other current liabilities
    
    
    4
    
    
    
    Total Current Liabilities
    
    
    1,072
    
    
    
    1,619Commitments and contingencies (Note 13)Minority interest
    
    
    35
    
    
    
    Shareholders equity:Preferred shares, $0.001 par value, 5,000,000 shares authorized,
0 shares issued and outstanding
    
    
    
    
    
    
    Common shares, $0.001 par value, 20,000,000 shares authorized as
of 2004 and 2003, respectively; 14,364,878 shares issued (97,000
to be issued) and 14,166,878 issued and outstanding in 2004 and
2003, respectively
    
    
    14
    
    
    
    14Additional paid-in capital
    
    
    11,160
    
    
    
    10,540Accumulated deficit
    
    
    (7,906
    )
    
    
    (7,481
    )Total Shareholders Equity
    
    
    3,268
    
    
    
    3,073Total Liabilities and Shareholders Equity
    
    $
    4,375
    
    
    $
    4,692
 See notes to unaudited condensed consolidated financial statements. 1




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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS Three months endedDecember 31,2004
    
    
    2003$ in thousands, except share amounts
    
    (unaudited)
    
    
    (unaudited)Revenues
    
    $
    749
    
    
    $
    2,701Cost of goods sold
    
    
    423
    
    
    
    1,713Gross profit
    
    
    326
    
    
    
    988Selling, general and administrative
    
    
    880
    
    
    
    620Engineering, research and development
    
    
    108
    
    
    
    57(Loss) / income from operations
    
    
    (662
    )
    
    
    311Other income/(expense), net:Interest income
    
    
    7
    
    
    
    Interest expense
    
    
    
    
    
    
    (14
    )(Loss) / income before provision for income taxes
    
    
    (655
    )
    
    
    297Income tax (benefit) / provision
    
    
    (230
    )
    
    
    43Net (loss) / income
    
    $
    (425
    )
    
    $
    254Net (loss) / income per share:Basic
    
    
    (.03
    )
    
    
    .02Diluted
    
    
    (.03
    )
    
    
    .02Weighted average shares outstandingBasic
    
    
    14,250
    
    
    
    12,800Diluted
    
    
    14,250
    
    
    
    15,915
 See notes to unaudited condensed consolidated financial statements. 2




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CONDENSED CONSOLIDATED STATEMENTS OF CASHFLOWS Three months endedDecember 31,2004
    
    
    2003(unaudited)
    
    
    (unaudited)$ in thousandsCash flows from operating activities:Net (loss) / income
    
    $
    (425
    )
    
    $
    254Adjustments to reconcile net (loss) / income to net cash (used in) provided by operating
activities:Depreciation and amortization
    
    
    3
    
    
    
    1Compensation to employees and directors paid with
stock options
    
    
    76
    
    
    
    52Tax benefit
    
    
    (230
    )
    
    
    Changes in operating assets and liabilities:Accounts receivable
    
    
    (367
    )
    
    
    (333
    )Inventories, net
    
    
    (1,481
    )
    
    
    38Deferred offering costs
    
    
    (55
    )Other assets
    
    
    40
    
    
    
    (31
    )Accounts payable
    
    
    (162
    )
    
    
    165Accrued payroll and related taxes
    
    
    11
    
    
    
    47Accrued interest
    
    
    
    
    
    
    8Other liabilities
    
    
    4
    
    
    
    Net cash (used in) provided by operating activities
    
    
    (2,586
    )
    
    
    201Cash flows from investing activities:Purchases of equipment, furniture and fixtures
    
    
    (9
    )
    
    
    (2
    )Net cash used in investing activities
    
    
    (9
    )
    
    
    (2
    )Cash flows from financing activities:Repayments on notes payable
    
    
    
    
    
    
    (100
    )Proceeds in connection with the exercise of options and warrants
    
    
    144
    
    
    
    10Proceeds in connection with the exercise of warrants in subsidiary
    
    
    35
    
    
    
    Net cash provided by (used in) financing activities
    
    
    179
    
    
    
    (90
    )(Decrease) increase in cash
    
    
    (2,416
    )
    
    
    109Cash, beginning of period
    
    
    3,269
    
    
    
    126Cash, end of period
    
    $
    853
    
    
    $
    235Supplemental cash flow information:Cash paid during the year for income taxes
    
    $
    
    
    
    $
    Cash paid during the year for interest
    
    $
    
    
    
    $
    6Noncash transactions:Conversion of accrued royalties to common stock
    
    $
    400
    
    
    $
    
 See notes to unaudited condensed consolidated financial statements. 3




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NOTES TO UNUADITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except for share amounts)  1.
    BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United States of America for
interim financial information and pursuant to the rules and regulations of the Securities and
Exchange Commission (SEC). Accordingly, they do not include all of the information and footnotes
required by accounting principles generally accepted in the United States of America for complete
financial statements. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been included. These
financial statements and notes thereto should be read in conjunction with the financial statements
and notes thereto for the year ended September 30, 2004 included in the Xenonics Holdings, Inc.
(the Holdings) Form 10-KSB filing. The results for the interim period are not necessarily
indicative of the results for the full fiscal year. The condensed consolidated financial statements include the accounts of Holdings and its
subsidiary Xenonics, Inc. (Xenonics), collectively, the Company. On December 14, 2004, one
warrant holder of Xenonics exercised his warrant to purchase 125,000 shares of Xenonics, Inc. As a
result, the Company currently owns 98.6% of the issued and outstanding capital stock of Xenonics.
The minority interest in the condensed consolidated financial statements represents the minority
stockholders proportionate share of equity in Xenonics. All significant inter-company items have
been eliminated upon consolidation. Certain reclassifications have been made to prior period financial statements to conform to
the current period presentation.  2.
    REVENUE RECOGNITION The Company recognizes revenue net of discounts upon shipment and when it has evidence that
arrangements exist and the price to the buyer is fixed through signed contracts or purchase orders.
Collectibility is reasonably assured through one or more of the following: government purchase,
historical payment practices or review of new customer credit. Customers do not have the right to
return product unless it is damaged or defective.  3.
    NET EARNINGS PER SHARE Basic earnings per share is computed by dividing the income / loss available to common
shareholders by the weighted average number of common shares outstanding. For the quarter ended
December 31, 2004, diluted earnings per share does not include the dilutive effect, if any, from
the potential exercise of stock options and warrants using the treasury stock method, because the
effect would have been anti-dilutive. For the quarter ended December 31, 2003, diluted earnings
per share includes the dilutive effect, if any, from the potential exercise of stock options and
warrants using the treasury stock method. 4




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4.
    INVENTORIES Inventories were comprised of : December 31,
    
    
    September 30,2004
    
    
    2004Raw materials
    
    $
    105
    
    
    $
    78Work in process
    
    
    65
    
    
    
    87Finished goods
    
    
    2,243
    
    
    
    767Reserve for obsolescence
    
    
    (10
    )
    
    
    (10
    )$
    2,403
    
    
    $
    922
  5.
    NEW ACCOUNTING PRONOUNCEMENTS In December 2004, the Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards (SFAS) No. 123R, Share Based Payment: An Amendment of FASB
Statements No. 123 and 95. This statement requires that the cost resulting from all share-based
payment transactions be recognized in the consolidated financial statements. This statement is
effective as of the beginning of the first interim or annual reporting period that begins after
June 15, 2005. The Company has adopted SFAS No. 123R.  6.
    ACCOUNTS PAYABLE AND ACCRUED EXPENSES The components of accounts payable and accrued expenses
consist of the following: December 31,
    
    
    September 30,2004
    
    
    2004Accounts payable
    
    $
    398
    
    
    $
    101Accrued expenses
    
    
    566
    
    
    
    1,025$
    964
    
    
    $
    1,126
  7.
    ACCRUED ROYALTIES On December 3, 2004, Lightrays and the Company came to an agreement where the $400 liability
will be satisfied through the issuance of 97,000 shares of the Companys common stock, Xenonics
10% ownership in Lightrays was returned and the patent was assigned to Xenonics Holdings, Inc. The
Company has not used, and is not currently using, the patented technology licensed from Lightrays.
The issuance of the shares of common stock is pending. The Companys ownership interest had no book
value. Robert Buie, the current general partner of Lightrays, became a member of the Board as
stipulated in the amended agreement in April 1998. He is also a shareholder.  8.
    SHAREHOLDERS EQUITY We are currently authorized to issue up to 20,000,000 shares of common stock. However, our
board of directors has approved an amendment to our articles of incorporation that will increase
the shares of common stock that are authorized for issuance to 50,000,000 shares. The proposed
amendment to our articles of incorporation is subject to stockholder approval at our annual meeting
to be held on February 25, 2005. 5




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9.
    USE OF ESTIMATES The preparation of financial statements, in conformity with accounting principles generally
accepted in the United States of America, requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and
liabilities, at the date of the financial statements, and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those estimates.  10.
    STOCK BASED COMPENSATION Stock Options- The Company uses the fair value based method of accounting for share-based
compensation provided to our employees in accordance with SFAS No. 123, Accounting for Stock-Based
Compensation. We value stock options issued based upon an option-pricing model and recognize this
fair value as an expense over the period in which the options vest. Options granted in the first quarter of fiscal year 2005 under the 2003 Option Plan totaled
245,000. The fair value of each option was estimated on the date of issuance using the
Black-Scholes option-pricing model, with the following weighted-average assumptions: dividend yield
of 0%; expected volatility of 65%; risk-free interest rate of 2.78%  2.84%; and expected lives of
three years from the date of grant. Total compensation expense for outstanding options for the three months ended December 31,
2004 was $76. Options granted in the first quarter of fiscal year 2004 under the 2003 Option Plan totaled
100,000. The fair value of each option was estimated on the date of issuance using the
Black-Scholes option-pricing model, with the following weighted-average assumptions: dividend yield
of 0%; expected volatility of 65%; risk-free interest rate of 2.36%  2.42%; and expected lives of
three years from the date of grant. Total compensation expense for outstanding options for the three months ended December 31,
2003 was $52. Options for 10,000 shares were exercised during the quarter ended December 31, 2003.  11.
    STOCK WARRANTS At December 31, 2004 2,324,465 warrants were outstanding. There were no warrants issued in the
three months ended December 31, 2004 or 2003. During the quarter ended December 31, 2004, four
warrant holders exercised 198,000 warrants. The exercise prices ranged from $0.60 to $1.05. In
the prior period, no warrants were exercised. As of December 31, 2004, all warrants were vested and
exercisable. 6




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12.
    MINORITY INTEREST On December 14, 2004, one warrant holder exercised his warrant to purchase 125,000 shares of
Xenonics, Inc. As a result, Xenonics Holdings, Inc. currently owns 98.6% of the issued and
outstanding capital stock of Xenonics, Inc. The calculated minority interest in net income for the
period ended December 31, 2004 was not material and therefore is not reported on the condensed
consolidated statement of operations.  13.
    CONTINGENCIES AND OTHER MATTERS For the three months ended December 31, 2004, the company sold to two significant customers
which accounted for 48.2% and 20.1% of sales. Trade receivables for these two customers at
December 31, 2004 were approximately 77.0% of total receivables. The Company is involved in legal actions arising in the normal course of business. After
taking into consideration legal counsels evaluation of such actions, management is of the opinion
that their outcome will not have a significant effect on the Companys financial position or
results of operations. On July 2, 2004, we filed a complaint for cancellation of a stock certificate and rescission
of a contract against a former officer, director and consultant and a company purportedly owned by
such individual in the Superior Court of California, County of San Diego. The suit alleges a
failure to perform contractual obligations under a written contract to provide lighting equipment
valued at $250 to our subsidiary, Xenonics, Inc., in exchange for 250,000 shares of Xenonics,
Inc.s common stock. We allege that the stock certificate is void or voidable. In our complaint,
we requested that the 250,000 shares be declared void or the defendants be ordered to pay us
$1,250, or the current value of the 250,000 shares of our common stock plus interest at the rate of
10% per year. We have also asked the court to award us costs of the lawsuit. The foregoing 250,000
shares are currently treated as outstanding shares for all purposes, and is included in the
financial statements. An answer to our complaint was filed on August 11, 2004 in which the defendants denied our
allegations, and asserted a number of affirmative defenses. On the same day, a cross complaint was
also filed against us and our subsidiary, Xenonics, Inc. The cross complaint asks the court to (i)
rescind the assignment of the NightHunterII patent application that one of the defendants assigned
to us in November 2003, (ii) declare that one of the defendants is the sole owner of the
NightHunterII patent application and that he is the inventor of an unrelated xenon illumination
and television camera system, (iii) enjoin us form further exploitation of the NightHunterII and
the xenon illumination and television camera system, and (iv) account for all profits that we have
earned on the NightHunterII from November 25, 2003. The defendant alleges that we purportedly have
not provided the agreed upon consideration for assignment of the NightHunterII patent application,
and that we have not recognized the defendant as the inventor of the xenon illumination and television
camera system. This matter is in the discovery stage and at the present time the Company based on
advice of counsel cannot reasonably assess the ultimate outcome. We are occasionally subject to legal proceedings and claims that arise in the ordinary course
of our business. It is impossible for us to predict with any certainty the outcome of pending
disputes, and we cannot predict whether any liability arising from pending claims and litigation
will be material in relation to our consolidated financial position or results of operations. 7




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14.
    SUBSEQUENT EVENTS In January 2005, the Company and certain of its stockholders closed a private placement of an
aggregate total of 820,800 shares of the Companys common stock to institutional investors. The
shares were sold at a price of $5.00 per share. Of the shares sold in the private placement,
500,000 were sold by the Company, and the balance was sold by stockholders of the Company. As a
result, Xenonics received approximately $2.1 million in proceeds. Roth Capital Partners, Newport
Beach and Bryant Park Capital, New York, acted as co-placement agents in this transaction. We paid
a cash fee of $150 along with warrants to purchase 40,000 shares of common stock to Roth Capital
and a cash fee of $50 along with warrants to purchase 10,000 shares of common stock to Bryant Park
Capital (BPC). The warrants have an exercise price of $5.50 and an expiration date of January 27,
2010. The principal of BPC is the son of our Chairman of the Board and Chief Executive Officer and
brother of a director of Xenonics. 8




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ITEM 2. Managements Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis should be read in conjunction with the condensed
consolidated financial statements and accompanying notes filed as part of this report. Forward-Looking Statements The following Managements Discussion and Analysis of Financial Condition and Results of
Operations, as well as information contained elsewhere in this report, contain statements that
constitute forward-looking statements within the meaning of Section 27A of the Securities Act of
1933, and Section 21E of the Securities Exchange Act of 1934. These statements include statements
regarding the intent, belief or current expectations of us, our directors or our officers with
respect to, among other things: anticipated financial or operating results, financial projections,
business prospects, future product performance and other matters that are not historical facts. The
success of our business operations is dependent on factors such as the impact of competitive
products, product development, commercialization and technology difficulties, the results of
financing efforts and the effectiveness of our marketing strategies, general competitive and
economic conditions. Forward-looking statements are not guarantees of future performance and
involve risks and uncertainties. Actual results may differ materially from those projected in the
forward-looking statements as a result of various factors. Results of Operations Three-months ended December 31, 2004 compared to the three-months ended December 31, 2003 Revenues:We operate in one industry segment, the security lighting systems industry, and all
of our revenues are derived from sales of our illumination products to various customers in that
segment. Revenues for the quarter ended December 31, 2004 were $749,000 compared to revenues of
$2,701,000 for the quarter ended December 31, 2003. An expected large order that was not received,
negatively impacted revenues in the quarter ended December 31, 2004. In the current quarter, the Company sold $508,000 or 68% of revenue to the military market
which includes both direct sales (U.S. Army and U.S. Marines) as well as sales to military
resellers. This compares to $2,618,000 or 97% of revenue to the military market (U.S. Army, U.S.
Navy, U.S. Marines and military resellers) in the same quarter of the prior period. Sales to the U.S. government agencies contributed $151,000 or 20% of revenue in the quarter
ended December 31, 2004. This compares to $8,000 for the same quarter in the prior year. The Company sold $34,000 or 5% to various international customers compared to $74,000 or 3%
for the three months ended December 31, 2004 and 2003, respectively. The balance of this periods sales of approximately $56,000 or 8% of revenue was generated
with small orders from other customers compared to less than $1,000 for the same period in the
prior period. Although our plan is to expand our customer base to more commercial and international clients,
we anticipate that the U.S. military will continue to be our largest customer in the fiscal year
ended September 30, 2005. 9




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Cost of Goods and Gross Profit:Cost of goods consist of our cost of manufacturing our
NightHunter products and the price that we pay to PerkinElmer for NightHunterII products that
PerkinElmer manufactures for us under our manufacturing agreement. The gross profit percentage on
revenue increased to 44% for the three-month period ended December 31, 2004 compared to 37% for the
three month period ended December 31, 2003. This improvement is due to lower cost on the
NightHunterII products in the current year. PerkinElmer costs were lowered as certain volume
requirements were met. Selling, General and Administrative:Selling, general and administrative expenses increased by
$315,000 to $935,000 for the three-month period ended December 31, 2004 compared to $620,000 for
the three-month period ended December 31, 2003. The incremental expenses consisted primarily of
increases in legal expenses of $129,000, accounting fees of $96,000, salaries and wages of $55,000
and insurance of $31,000 with the remaining $4,000 from various other expenses. Engineering, Research & Development:Engineering, research and development expenses increased
by $51,000 for the three-month period ended December 31, 2004 compared to the three- month period
ended December 31, 2003. Increased headcount impacted spending for the period by $41,000. With
concentrated efforts in this area, other related engineering costs have also increased.
Engineering, research and development spending levels are expected to continue to increase in the
future as we develop new products and make improvements to our existing products. Net Income (Loss):The Company experienced a loss of $425,000 for the three-month period ended
December 31, 2004 compared to profit of $254,000 for the three-month period ended December 31,
2003. The driving factor was the revenue shortfall in the current quarter from a large expected
order that we did not receive during the quarter. Liquidity and Capital Resources As of December 31, 2004, the Company had working capital of $3,237,000 and a current
ratio of 4.02-to-1 as compared to working capital of $3,014,000 and a current ratio of 2.9-to-1 as
of September 30, 2004. Our net loss of $425,000 for the quarter ended December 31, 2004 negatively impacted cash in
addition to an adjustment of $230,000 for tax benefit, an increase in inventory of $1,481,000,
increase in accounts receivable of $367,000, increase in deferred offering costs of $55,000 and
decrease in accounts payable balance of $162,000 for a combined use of cash of $2,720,000. This
was offset slightly by various sources of cash totaling $134,000 which created net cash used for
operations of $2,586,000 for the quarter ended December 31, 2004. The Company increased inventory
levels in anticipation of increased levels of sales in the 2nd and 3rd
quarters. Net cash provided by financing activities for the quarter ended December 31, 2004 included
$144,000 from the exercise of warrants to purchase common stock in Xenonics Holdings, Inc. and
$35,000 from the exercise of warrants to purchase common stock in Xenonics, Inc. See Note 12, to
condensed consolidated financial statements, Minority Interest. The Company closed a private placement on January 28, 2005 that provided $2.3 million in
cash. Based on the amount of working capital that we had on December 31, 2004, plus the additional
cash of $2.3 million from the January 2005 private placement and expected cash flow from operations
during the next three quarters, we believe that we have sufficient financial resources to fund our
operations through September 30, 2005. However, due to the nature of our business, there is no
assurance that we will receive new orders during the quarters that we expect to receive them. 10




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Seasonality During our limited operating history, we have experienced stronger sales in the second
and third fiscal quarters (January through June) compared to sales during the first and fourth
quarters (July through December). We believe that this seasonal pattern of sales primarily reflects
the customary timing of purchases by our military customers. We expect that the seasonal pattern
of revenue generation may change if our plans to enter additional, non-governmental market segments
are successful. 11




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ITEM 3. CONTROLS AND PROCEDURES We maintain disclosure controls and procedures that are designed to ensure that information
required to be disclosed in our Exchange Act reports is recorded, processed, summarized and
reported within the time periods specified in the Securities and Exchange Commissions rules and
forms and that such information is accumulated and communicated to this companys management,
including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for
timely decisions regarding required disclosure. In designing and evaluating the disclosure controls
and procedures, management recognizes that any controls and procedures, no matter how well designed
and operated, can provide only reasonable assurance of achieving the desired control objectives,
and management is required to apply its judgment in evaluating the cost-benefit relationship of
possible controls and procedures. As required by Securities and Exchange Commission Rule 13a-15(b), we carried out an
evaluation, under the supervision and with the participation of the Companys management, including
our Chief Executive Officer and the Companys Chief Financial Officer, of the effectiveness of the
design and operation of our disclosure controls and procedures as of the end of the quarter covered
by this report. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer
concluded that our disclosure controls and procedures are effective in ensuring that the
information required to be disclosed in our reports filed or submitted under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified in the Securities
and Exchange Commission rules and forms. There has been no change in our internal control over financial reporting during our most
recent fiscal quarter that has materially affected, or is reasonably likely to materially affect,
our internal control over financial reporting. 12




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PART II. OTHER INFORMATION 
 ITEM 1. Litigation The Company is involved in legal actions arising in the normal course of business. After
taking into consideration legal counsels evaluation of such actions, management is of the opinion
that their outcome will not have a significant effect on the Companys financial position or
results of operations. On July 2, 2004, we filed a complaint for cancellation of a stock certificate and rescission
of a contract against a former officer, director and consultant and a company purportedly owned by
such individual in the Superior Court of California, County of San Diego. The suit alleges a
failure to perform contractual obligations under a written contract to provide lighting equipment
valued at $250 to our subsidiary, Xenonics, Inc., in exchange for 250,000 shares of Xenonics,
Inc.s common stock. We allege that the stock certificate is void or voidable. In our complaint,
we requested that the 250,000 shares be declared void or the defendants be ordered to pay us
$1,250, or the current value of the 250,000 shares of our common stock plus interest at the rate of
10% per year. We have also asked the court to award us costs of the lawsuit. The foregoing 250,000
shares are currently treated as outstanding shares for all purposes, and is included in the
financial statements. An answer to our complaint was filed on August 11, 2004 in which the defendants denied our
allegations, and asserted a number of affirmative defenses. On the same day, a cross complaint was
also filed against us and our subsidiary, Xenonics, Inc. The cross complaint asks the court to (i)
rescind the assignment of the NightHunterII patent application that one of the defendants assigned
to us in November 2003, (ii) declare that one of the defendants is the sole owner of the
NightHunterII patent application and that he is the inventor of an unrelated xenon illumination
and television camera system, (iii) enjoin us form further exploitation of the NightHunterII and
the xenon illumination and television camera system, and (iv) account for all profits that we have
earned on the NightHunterII from November 25, 2003. The defendant alleges that we purportedly have
not provided the agreed upon consideration for assignment of the NightHunterII patent application,
and that we have not recognized the defendant as the inventor of the xenon illumination and
television camera system. This matter is in the discovery stage and at the present time the Company
based on advice of counsel cannot reasonably assess the ultimate outcome. We are occasionally subject to legal proceedings and claims that arise in the ordinary course
of our business. It is impossible for us to predict with any certainty the outcome of pending
disputes, and we cannot predict whether any liability arising from pending claims and litigation
will be material in relation to our consolidated financial position or results of operations. 
 ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds On December 6, 2004: (i) a warrant holder exercised a warrant to purchase 100,000 shares of
common stock at an exercise price of $0.825 per share; (ii) a second warrant holder exercised a
warrant to purchase 18,000 shares of common stock at an exercise price of $0.60 per share; and
(iii) a third warrant holder exercised a warrant to purchase 74,000 shares of common stock at an
exercise price of $0.60 per share. On December 14, 2004, a warrant holder exercised a warrant to
purchase 6,000 shares of common stock at an exercise price of $1.05 per share, and a warrant holder
of Xenonics, Inc. exercised a warrant to purchase 125,000 shares of common stock at an exercise
price of $0.275 per share. No underwriter was involved in any warrant exercise described in this
paragraph, and the share issuances were made without any public solicitation or the payment of any
commissions in reliance on exemptions under Sections 3(a)(9) and 4(2) of the Securities Act. 13




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On December 14, 2004, one warrant holder exercised his warrant to purchase 125,000 shares of
Xenonics, Inc. As a result, Xenonics Holdings, Inc. currently owns 98.6% of the issued and
outstanding capital stock of Xenonics, Inc. In January 2005, the Company and certain of its stockholders closed a private placement of an
aggregate total of 820,800 shares of our common stock to institutional investors. The shares were
sold at a price of $5.00 per share. Of the shares sold in the private placement, 500,000 were sold
by us, and the balance was sold by stockholders of Xenonics Holdings, Inc. As a result, we
received approximately $2.3 million in proceeds. Roth Capital Partners, Newport Beach and Bryant Park Capital, New York, acted as co-placement
agents in this transaction. We paid a cash fee of $150 along with warrants to purchase 40,000
shares of common stock to Roth Capital and a cash fee of $50 along with warrants to purchase 10,000
shares of common stock to Bryant Park Capital (BPC). The principal of BPC is Joel Magerman, a son
of Alan P. Magerman (our Chairman of the Board and Chief Executive Officer) and brother of Michael
Magerman (a director of Xenonics Holdings, Inc.). The warrants were issued at $5.50 for a five
year life. Our sale of 500,000 shares to the investors and issuance of warrants to RCP and BPC were not
registered under the Securities Act. The securities were issued in reliance upon the exemption
from registration contained in Section 4(2) of the Securities Act and Regulation D promulgated
thereunder because, among other things, the transaction did not involve a public offering, all of
the investors and placement agents are accredited institutional buyers, the investors and placement
agents had access to information about the Company, and we took appropriate measures to restrict
the transfer of the securities. We did not repurchase any shares of our common stock during the first quarter ended December
31, 2004. 14




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ITEM 5. Other Information None. 
 ITEM 6. Exhibits ExhibitNumber
    
    Description31.1
    
    Certification of the Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act31.2
    
    Certification of the Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act32.1
    
    Certifications pursuant to Section 906 of the Sarbanes-Oxley Act
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SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized. XENONICS HOLDINGS, INC.By:
    
    /s/ Alan P. MagermanDate: February 14, 2005
    
    
    
    Alan P. MagermanChief Executive OfficerBy:
    
    /s/ Donna G. LeeDonna G. LeeDate: February 14, 2005
    
    
    
    Chief Financial Officer
 16