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UNITED STATES
SECURITIES 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 June 30, 2005
 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: 0-50775
 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
(Address of principal executive offices)
    
    92008-7297
(Zip Code)
 (760) 438-4004
 þ o
 o þ




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TABLE OF CONTENTS
 PART I. FINANCIAL INFORMATIONItem 1. Financial StatementsCondensed Consolidated Balance Sheets as of June 30, 2005 (unaudited) and September 30, 2004
    
    
    1Condensed Consolidated Statements of Operations for the Three and Nine Months ended June 30, 2005 and 2004 (unaudited)
    
    
    2Condensed Consolidated Statements of Cash Flows for the Nine Months ended June 30, 2005 and 2004 (unaudited)
    
    
    3Notes
to Unaudited Condensed Consolidated Financial Statements
    
    
    4Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    10Item 3. Controls and Procedures
    
    
    14PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    15Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    16Item 5. Other Information
    
    
    17Item 6. Exhibits
    
    
    17SIGNATURE PAGE
    
    
    18EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1
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PART I. FINANCIAL INFORMATION
 
 ITEM 1. Financial Statements
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 June 30,
    
    September 30,2005
    
    2004$ in thousands, except share amounts
    
    (unaudited)Assets (Note 7)Current assets:Cash
    
    $
    1,166
    
    
    $
    3,269Accounts receivable, net of allowance for doubtful accounts of $0
    
    
    2,951
    
    
    
    253Inventories, net
    
    
    3,205
    
    
    
    922Other current assets
    
    
    209
    
    
    
    189Total Current Assets
    
    
    7,531
    
    
    
    4,633Equipment, furniture and fixtures at cost, less accumulated
depreciation of $67 and $59
    
    
    49
    
    
    
    35Other non-current assets
    
    
    25
    
    
    
    24Total Assets
    
    $
    7,605
    
    
    $
    4,692Liabilities and Shareholders EquityCurrent liabilities:Accounts payable
    
    $
    1,495
    
    
    $
    1,126Due to factor
    
    
    1,305
    
    
    
    Accrued royalty
    
    
    
    
    
    
    400Accrued payroll and related taxes
    
    
    105
    
    
    
    93Other current liabilities
    
    
    10
    
    
    
    Total Current Liabilities
    
    
    2,915
    
    
    
    1,619Commitments and contingencies (Note 13)Minority interest
    
    
    31
    
    
    
    Shareholders equity:Preferred shares, $0.001 par value, 5,000,000 shares authorized,
0 shares issued and outstanding
    
    
    
    
    
    
    Common shares, $0.001 par value, 50,000,000 and 20,000,000
shares authorized as of 2005 and 2004, respectively; 15,511,878
shares issued and 14,166,878 issued and outstanding in 2005 and
2004, respectively
    
    
    16
    
    
    
    14Additional paid-in capital
    
    
    13,930
    
    
    
    10,540Accumulated deficit
    
    
    (9,287
    )
    
    
    (7,481
    )Total Shareholders Equity
    
    
    4,659
    
    
    
    3,073Total Liabilities and Shareholders Equity
    
    $
    7,605
    
    
    $
    4,692
 See notes to unaudited condensed consolidated financial statements.
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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 Three months ended
    
    Nine months endedJune 30,
    
    June 30,2005
    
    2004
    
    2005
    
    2004$ in thousands, except share amounts
    
    (unaudited)
    
    (unaudited)
    
    (unaudited)
    
    (unaudited)Revenues
    
    $
    3,075
    
    
    $
    4,119
    
    
    $
    3,905
    
    
    $
    10,984Cost of goods sold
    
    
    1,712
    
    
    
    2,310
    
    
    
    2,198
    
    
    
    6,385Gross profit
    
    
    1,363
    
    
    
    1,809
    
    
    
    1,707
    
    
    
    4,599Selling, general and administrative
    
    
    1,277
    
    
    
    882
    
    
    
    3,248
    
    
    
    2,206Engineering, research and development
    
    
    111
    
    
    
    45
    
    
    
    335
    
    
    
    120(Loss) / income from operations
    
    
    (25
    )
    
    
    882
    
    
    
    (1,876
    )
    
    
    2,273Other income/(expense), net:Interest income
    
    
    3
    
    
    
    6
    
    
    
    16
    
    
    
    7Interest expense
    
    
    (7
    )
    
    
    (2
    )
    
    
    (8
    )
    
    
    (30
    )Other income
    
    
    2
    
    
    
    
    
    
    
    3
    
    
    
    (Loss) / income before provision for income
taxes
    
    
    (27
    )
    
    
    886
    
    
    
    (1,865
    )
    
    
    2,250Income tax provision
    
    
    (57
    )
    
    
    90
    
    
    
    (56
    )
    
    
    196Net income / (loss) before minority interest
    
    $
    30
    
    
    $
    796
    
    
    $
    (1,809
    )
    
    $
    2,054Minority interest
    
    
    7
    
    
    
    
    
    
    
    (3
    )
    
    
    Net income / (loss)
    
    $
    23
    
    
    $
    796
    
    
    $
    (1,806
    )
    
    $
    2,054Net income / (loss) per share:Basic
    
    
    
    
    
    
    .06
    
    
    
    (.12
    )
    
    
    .15Diluted
    
    
    
    
    
    
    .05
    
    
    
    (.12
    )
    
    
    .12Weighted average shares outstandingBasic
    
    
    15,191
    
    
    
    14,080
    
    
    
    14,742
    
    
    
    13,285Diluted
    
    
    17,706
    
    
    
    17,246
    
    
    
    14,742
    
    
    
    16,826
 See notes to unaudited condensed consolidated financial statements.
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CONDENSED CONSOLIDATED STATEMENTS OF CASHFLOWS
 Nine months endedJune 30,2005
    
    2004$ in thousands
    
    (unaudited)
    
    (unaudited)Cash flows from operating activities:Net (loss) / income
    
    $
    (1,806
    )
    
    $
    2,054Adjustments to reconcile net (loss) / income to net cash (used in) provided by operating
activities:Depreciation and amortization
    
    
    8
    
    
    
    4Compensation to employees and directors paid with stock
options
    
    
    477
    
    
    
    137Interest expense converted to common stock
    
    
    
    
    
    
    17Issuance of common stock for services
    
    
    
    
    
    
    50Minority interest in net loss of subsidiary
    
    
    (3
    )
    
    
    Changes in operating assets and liabilities:Accounts receivable
    
    
    (2,698
    )
    
    
    (1,071
    )Inventories, net
    
    
    (2,283
    )
    
    
    (199
    )Other current assets
    
    
    (21
    )
    
    
    (34
    )Accounts payable
    
    
    369
    
    

    
    530Accrued payroll and related taxes
    
    
    12
    
    
    
    179Accrued interest
    
    
    
    
    
    
    (85
    )Other current liabilities
    
    
    10
    
    
    
    Net cash (used in) provided by operating activities
    
    
    (5,935
    )
    
    
    1,582Cash flows from investing activities:Purchases of equipment, furniture and fixtures
    
    
    (22
    )
    
    
    (27
    )Net cash used in investing activities
    
    
    (22
    )
    
    
    (27
    )Cash flows from financing activities:Repayments on notes payable
    
    
    
    
    
    
    (184
    )Repayment of short-term borrowings
    
    
    
    
    
    
    (400
    )Proceeds from short-term debt
    
    
    1,305Net proceeds from issuance of common stock net of expenses
    
    
    2,180
    
    
    
    2,200Proceeds in connection with the exercise of options and
warrants
    
    
    335
    
    
    
    9Proceeds in connection with the exercise of warrants in
subsidiary
    
    
    34
    
    
    
    Net cash provided by (used in) financing activities
    
    
    3,854
    
    
    
    1,625(Decrease) increase in cash
    
    
    (2,103
    )
    
    
    3,180Cash, beginning of period
    
    
    3,269
    
    
    
    126Cash, end of period
    
    $
    1,166
    
    
    $
    3,306Supplemental cash flow information:Cash paid during the year for income taxes
    
    $
    (56
    )
    
    $
    196Cash paid during the year for interest
    
    $
    3
    
    
    $
    61Noncash transactions:Conversion of accrued royalties to common stock
    
    $
    400
    
    
    $
    Conversion of long-term debt to common stock
    
    
    
    
    
    $
    250Conversion of accrued interest to common stock
    
    
    
    
    
    $
    17
 See notes to unaudited condensed consolidated financial statements.
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NOTES TO UNUADITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (in thousands, except for share amounts)
 1. BASIS OF PRESENTATION
     2. REVENUE RECOGNITION
  3. NET EARNINGS PER SHARE
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4. INVENTORIES
  June 30,
    
    September 30,2005
    
    2004Raw materials
    
    $
    169
    
    
    $
    78Work in process
    
    
    139
    
    
    
    87Finished goods
    
    
    2,910
    
    
    
    767Reserve for obsolescence
    
    
    (13
    )
    
    
    (10
    )$
    3,205
    
    
    $
    922
 5. NEW ACCOUNTING PRONOUNCEMENTS
   6. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
  June 30,
    
    September 30,2005
    
    2004Accounts payable
    
    $
    1,334
    
    
    $
    101Accrued expenses
    
    
    161
    
    
    
    1,025$
    1,495
    
    
    $
    1,126
 7. DUE TO FACTOR
  5




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8. ACCRUED ROYALTIES
   9. SHAREHOLDERS EQUITY
  10. USE OF ESTIMATES
  6




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11. STOCK BASED COMPENSATION
 Stock Options Accounting for Stock-Based
Compensation
      12. STOCK WARRANTS
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13. MINORITY INTEREST
  14. SIGNIFICANT CONTRACTS
  15. CONTINGENCIES AND OTHER MATTERS
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16. SUBSEQUENT EVENTS
   9




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ITEM 2. Managements Discussion and Analysis
of Financial Condition and Results of Operations
  Forward-Looking Statements
  Results of Operations
 Three-months ended June 30, 2005 compared to the three-months ended June 30, 2004
 Revenues:
   10




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Cost of Goods and Gross Profit:
 Selling, General and Administrative:
 Engineering, Research & Development:
 Net Income (Loss):
 Nine-months ended June 30, 2005 compared to the nine-months ended June 30, 2004
 Revenues:
  11




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Cost of Goods and Gross Profit:
 Selling, General and Administrative:
 Engineering, Research & Development:
 12




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Net Income (Loss):
 Liquidity and Capital Resources
     Seasonality
  13




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ITEM 3. CONTROLS AND PROCEDURES
    14




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PART II. OTHER INFORMATION
 
 ITEM 1. Legal Proceedings
    15




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ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
      16




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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 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
  XENONICS HOLDINGS, INC.By:

/s/
Richard J. NaughtonDate:  August 12, 2005
    
    Richard J. NaughtonChief Executive OfficerBy:
    /s/ Donna G. LeeDate:  August 12, 2005
    
    Donna G. LeeChief Financial Officer 18