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UNITED STATESSECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 
 FORM 10-QSB
 
 þ
    
    QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended December 31, 2007
 o
    
    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission file number: 001-32469
 XENONICS HOLDINGS, INC.
  
 Nevada
(State or other jurisdiction of 
incorporation or organization)
    
    84-1433854
(I.R.S. Employer
Identification Number)2236 Rutherford Road, Suite 123
Carlsbad, California
    
    92008-7297(Address of principal executive offices)
    
    (Zip Code)
 (760) 448-9700
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TABLE OF CONTENTS
 PART I. FINANCIAL INFORMATIONItem 1. Financial StatementsCondensed Consolidated Balance Sheets as of December 31, 2007 (unaudited) and September 30, 2007
    
    
    1Condensed Consolidated Statements of Operations for the Three Months ended December 31, 2007 and 2006 (unaudited)
    
    
    2Condensed Consolidated Statements of Cash Flows for the Three Months ended December 31, 2007 and 2006 (unaudited)
    
    
    3Notes to Unaudited Condensed Consolidated Financial Statements
    
    
    4Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    9Item 3. Controls and Procedures
    
    
    11PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    12Item 5. Other Information
    
    
    12Item 6. Exhibits
    
    
    12SIGNATURE PAGE
    
    
    13EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1
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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 ITEM 1. Financial Statements
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 December 31,
    
    September 30,2007
    
    2007rounded in thousands, except par value
    
    (unaudited)AssetsCurrent Assets:Cash
    
    $
    334,000
    
    
    $
    2,388,000Accounts receivable, net
    
    
    3,326,000
    
    
    
    305,000Inventories
    
    
    1,924,000
    
    
    
    2,635,000Other current assets
    
    
    409,000
    
    
    
    365,000Total Current Assets
    
    
    5,993,000
    
    
    
    5,693,000Equipment, furniture and fixtures at cost, less accumulated
depreciation of $121,000 and $108,000
    
    
    202,000
    
    
    
    215,000Total Assets
    
    $
    6,195,000
    
    
    $
    5,908,000Liabilities and Shareholders EquityCurrent Liabilities:Accounts payable
    
    $
    772,000
    
    
    $
    892,000Accrued expenses
    
    
    105,000
    
    
    
    123,000Accrued payroll and related taxes
    
    
    178,000
    
    
    
    151,000Total Current Liabilities
    
    
    1,055,000
    
    
    
    1,166,000Commitments and contingencies (Note 8)Shareholders Equity:Preferred shares, $0.001 par value, 5,000 shares
authorized, 0 shares issued and outstanding
    
    
    
    
    
    
    Common shares, $0.001 par value, 50,000 shares authorized
as of December 31, 2007 and September 30, 2007;
19,952,000 shares issued as of December 31, 2007 and
September 30, 2007; 19,839,000 shares outstanding as of
December 31, 2007 and September 30, 2007
    
    
    20,000
    
    
    
    20,000Additional paid-in capital
    
    
    23,427,000
    
    
    
    23,341,000Accumulated deficit
    
    
    (18,001,000
    )
    
    
    (18,313,000
    )5,446,000
    
    
    
    5,048,000Less treasury stock, at cost, 113,000 shares as of
December 31, 2007 and September 30, 2007
    
    
    (306,000
    )
    
    
    (306,000
    )Total Shareholders Equity
    
    
    5,140,000
    
    
    
    4,742,000Total Liabilities and Shareholders Equity
    
    $
    6,195,000
    
    
    $
    5,908,000
 See notes to unaudited condensed consolidated financial statements.
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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 Three months endedDecember 31,2007
    
    2006rounded in thousands, except per share amounts
    
    (unaudited)Revenues
    
    $
    3,561,000
    
    
    $
    916,000Cost of goods sold
    
    
    1,806,000
    
    
    
    202,000Gross profit
    
    
    1,755,000
    
    
    
    714,000Selling, general and administrative
    
    
    1,317,000
    
    
    
    974,000Engineering, research and development
    
    
    139,000
    
    
    
    159,000Income (loss) from operations
    
    
    299,000
    
    
    
    (419,000
    )Other income/(expense):Interest income
    
    
    13,000
    
    
    
    14,000Interest expense
    
    
    
    
    
    
    (1,000
    )Income (loss) before provision for income taxes
    
    
    312,000
    
    
    
    (406,000
    )Income tax provision
    
    
    
    
    
    
    Net income (loss)
    
    $
    312,000
    
    
    $
    (406,000
    )Net income (loss) per share:Basic
    
    $
    0.02
    
    
    $
    (0.02
    )Fully-diluted
    
    $
    0.01
    
    
    $
    (0.02
    )Weighted average shares outstanding:Basic
    
    
    19,839,000
    
    
    
    16,875,000Fully-diluted
    
    
    20,997,000
    
    
    
    16,875,000
 See notes to unaudited condensed consolidated financial statements.
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 Three months endedDecember 31,2007
    
    2006Rounded in thousands
    
    (unaudited)Cash flows from operating activities:Net income (loss)
    
    $
    312,000
    
    
    $
    (406,000
    )Adjustments
to reconcile net income (loss) to net cash provided by (used in) operating activities:Depreciation and amortization
    
    
    13,000
    
    
    
    4,000Provision for bad debts
    
    
    (21,000
    )
    
    
    Non-cash compensation to employees and directors
    
    
    84,000
    
    
    
    248,000Non-cash compensation to consultants
    
    
    2,000
    
    
    
    33,000Changes in operating assets and liabilities:Accounts receivable
    
    
    (3,000,000
    )
    
    
    1,522,000Inventories, net
    
    
    711,000
    
    
    
    (82,000
    )Other current assets
    
    
    (44,000
    )
    
    
    (266,000
    )Accounts payable
    
    
    (120,000
    )
    
    
    (139,000
    )Accrued expenses
    
    
    (18,000
    )
    
    
    (1,000
    )Accrued payroll and related taxes
    
    
    27,000
    
    
    
    53,000Net cash
provided by  (used in) operating activities
    
    
    (2,054,000
    )
    
    
    952,000Cash flows from investing activities:Purchases of equipment, furniture and fixtures
    
    
    
    
    
    
    (34,000
    )Net cash used in investing activities
    
    
    
    
    
    
    (34,000
    )Cash flows from financing activities:Proceeds in connection with the exercise of warrants
    
    
    
    
    
    
    196,000Proceeds in connection with stock subscription
    
    
    
    
    
    
    650,000Net cash provided by financing activities
    
    
    
    
    
    
    846,000Net increase (decrease) in cash
    
    
    (2,054,000
    )
    
    
    1,778,000Cash, beginning of period
    
    
    2,388,000
    
    
    
    99,000Cash, end of period
    
    $
    334,000
    
    
    $
    1,877,000Supplemental cash flow information:Cash paid during the period for income taxes
    
    $
    
    
    
    $
    Cash paid during the period for interest
    
    $
    
    
    
    $
    1,000
 See notes to unaudited condensed consolidated financial statements.
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NOTES TO UNUADITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (rounded in thousands)
 1. BASIS OF PRESENTATION
   2 . REVENUE RECOGNITION
  3. EARNINGS PER SHARE
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Three Months EndedDecember 31, 2007Numerator: Net income
    
    $
    312,000Denominator:Denominator for basic earnings per share  weighted average shares
    
    
    19,839,000Effect of dilutive securitiesEffect of dilutive securitiesEmployee stock options
    
    
    1,158,000Denominator for diluted earnings per share  adjusted weighted
average shares and assumed conversion
    
    
    20,997,000Basic earnings per share
    
    $
    0.02Diluted earnings per share
    
    $
    0.01
    4. INVENTORIES
  December 31,
    
    September 30,2007
    
    2007(unaudited)Raw materials
    
    $
    904,000
    
    
    $
    805,000Work in process
    
    
    231,000
    
    
    
    228,000Finished goods
    
    
    789,000
    
    
    
    1,602,000$
    1,924,000
    
    
    $
    2,635,000
 5. USE OF ESTIMATES
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6. STOCK BASED COMPENSATION
 Stock Options Accounting for Stock-Based Compensation,
    For the Three MonthsEnded December 31,2007
    
    2006Risk-free interest rate
    
    
    4.16
    %
    
    
    4.60
    %Expected life (in years)
    
    
    4
    
    
    
    4Dividend yield
    
    
    0.0
    %
    
    
    0.0
    %Expected volatility
    
    
    105
    %
    
    
    99
    %Weighted-average volatility
    
    
    105
    %
    
    
    99
    %
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WeightedWeighted
    
    
    AverageStock
    
    
    Average
    
    
    Contractual
    
    
    AggregateOptions
    
    
    Exercise Price
    
    
    Term
    
    
    Intrinsic Value *Outstanding at October 1, 2007
    
    
    1,988,000
    
    
    $
    2.52
    
    
    
    3.75Granted
    
    
    25,000
    
    
    $
    2.02
    
    
    
    4.76Exercised
    
    
    
    
    
    
    
    
    
    
    Forfeited or Expired
    
    
    
    
    
    
    
    
    
    
    Outstanding at December 31, 2007
    
    
    2,013,000
    
    
    $
    2.52
    
    
    
    3.51
    
    
    $
    716,000Exercisable at December 31, 2007
    
    
    1,352,000
    
    
    $
    2.48
    
    
    
    3.16
    
    
    $
    714,000
 
 *
    
    The aggregate intrinsic value of a stock option is the amount by which the market value of the
underlying stock exceeds the exercise price of the option. The market value of our stock was $2.01
at December 31, 2007.  Weighted AverageGrant-DateStock Options
    
    
    Fair ValueNon-vested at October 1, 2007
    
    
    699,000
    
    
    $
    1.72Granted
    
    
    25,000
    
    
    $
    1.47Forfeited or Expired
    
    
    
    
    
    
    Vested
    
    
    (63,000
    )
    
    $
    1.60Non-vested at December 31, 2007
    
    
    661,000
    
    
    $
    1.73
   Stock warrants 
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7. INCOME TAXES
  Accounting for Income Taxes,
 8. CONTINGENCIES AND OTHER MATTERS
  9. SUBSEQUENT EVENT
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ITEM 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations (rounded in thousands)
  Forward-Looking Statements
  Results of Operations
 Three-months ended December 31, 2007 compared to the three-months ended December 31, 2006
 Revenues:
  Cost of Goods and Gross Profit:
  Selling, General and Administrative:
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Engineering, Research & Development:
 Net Income (Loss):
 Liquidity and Capital Resources
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ITEM 3.
    
    CONTROLS AND PROCEDURES
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PART II. OTHER INFORMATION
 
 ITEM 1.
    
    Legal Proceedings
  
 ITEM 5.
    
    Other Information
  
 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 Financial 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
  XENONICS HOLDINGS, INC.Date: February 12, 2008
    By:
    /s/ Charles W. HunterCharles W. HunterChief Executive OfficerDate: February 12, 2008
    By:
    /s/ Richard S. KayRichard S. KayChief Financial Officer 13