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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 June 30, 2008
 o
    
    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period fromto
 Commission file number: 001-32469
 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)
 (760) 448-9700
 þ o
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TABLE OF CONTENTS
 PART I. FINANCIAL INFORMATIONItem 1. Financial StatementsCondensed Consolidated Balance Sheets as of June 30, 2008 (unaudited)
and September 30, 2007
    
    
    1Condensed Consolidated Statements of Operations for the Three and Nine Months
ended June 30, 2008 and 2007 (unaudited)
    
    
    2Condensed Consolidated Statements of Cash Flows for
the Nine Months ended June 30, 2008 and 2007 (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
    
    
    13PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    14Item 4. Submission of Matters to a Vote of Security Holders
    
    
    14Item 5. Other Information
    
    
    14Item 6. Exhibits
    
    
    15SIGNATURES
    
    
    16EXHIBIT 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
 June 30,
    
    September 30,2008
    
    2007rounded in thousands, except par value
    
    (unaudited)AssetsCurrent Assets:Cash
    
    $
    860,000
    
    
    $
    2,388,000Investments
    
    
    1,000,000
    
    
    
    Accounts receivable, net
    
    
    1,278,000
    
    
    
    305,000Inventories
    
    
    1,769,000
    
    
    
    2,635,000Other current assets
    
    
    370,000
    
    
    
    365,000Total Current Assets
    
    
    5,277,000
    
    
    
    5,693,000Equipment, furniture and fixtures at cost, less accumulated
depreciation of $148,000 and $108,000
    
    
    175,000
    
    
    
    215,000Total Assets
    
    $
    5,452,000
    
    
    $
    5,908,000Liabilities and Shareholders EquityCurrent Liabilities:Accounts payable
    
    $
    423,000
    
    
    $
    892,000Accrued expenses
    
    
    188,000
    
    
    
    123,000Accrued payroll and related taxes
    
    
    51,000
    
    
    
    151,000Total Current Liabilities
    
    
    662,000
    
    
    
    1,166,000Commitments and Contingencies (Note 10)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 shares
authorized as of June 30, 2008 and September
30, 2007; 20,064,000 shares issued as of June 30, 2008 and
19,952,000 issued as of September 30, 2007; 19,951,000
shares outstanding as of June 30, 2008 and 19,839,000
outstanding as of September 30, 2007
    
    
    20,000
    
    
    
    20,000Additional paid-in capital
    
    
    23,638,000
    
    
    
    23,341,000Accumulated deficit
    
    
    (18,562,000
    )
    
    
    (18,313,000
    )5,096,000
    
    
    
    5,048,000Less treasury stock, at cost, 113,000 shares as of June
30, 2008 and September 30, 2007
    
    
    (306,000
    )
    
    
    (306,000
    )Total Shareholders Equity
    
    
    4,790,000
    
    
    
    4,742,000Total Liabilities and Shareholders Equity
    
    $
    5,452,000
    
    
    $
    5,908,000
 See notes to unaudited condensed consolidated financial statements.
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Three months ended
    
    Nine months endedJune 30,
    
    June 30,2008
    
    2007
    
    2008
    
    2007rounded in thousands, except per share amounts
    
    (unaudited)
    
    (unaudited)Revenues
    
    $
    1,892,000
    
    
    $
    1,023,000
    
    
    $
    9,074,000
    
    
    $
    3,585,000Cost of goods sold
    
    
    1,244,000
    
    
    
    668,000
    
    
    
    4,995,000
    
    
    
    1,209,000Gross profit
    
    
    648,000
    
    
    
    355,000
    
    
    
    4,079,000
    
    
    
    2,376,000Selling, general and administrative
    
    
    1,149,000
    
    
    
    2,158,000
    
    
    
    3,735,000
    
    
    
    4,483,000Engineering, research and development
    
    
    289,000
    
    
    
    175,000
    
    
    
    630,000
    
    
    
    486,000Income (loss) from operations
    
    
    (790,000
    )
    
    
    (1,978,000
    )
    
    
    (286,000
    )
    
    
    (2,593,000
    )Other income/(expense):Interest income
    
    
    7,000
    
    
    
    26,000
    
    
    
    39,000
    
    
    
    62,000Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,000
    )Income (loss) before provision for income taxes
    
    
    (783,000
    )
    
    
    (1,952,000
    )
    
    
    (247,000
    )
    
    
    (2,532,000
    )Income tax provision
    
    
    
    
    
    
    
    
    
    
    2,000
    
    
    
    2,000Net income (loss)
    
    $
    (783,000
    )
    
    $
    (1,952,000
    )
    
    $
    (249,000
    )
    
    $
    (2,534,000
    )Net income (loss) per share:Basic
    
    $
    (0.04
    )
    
    
    ($0.11
    )
    
    $
    (0.01
    )
    
    
    ($0.14
    )Diluted
    
    $
    (0.04
    )
    
    
    ($0.11
    )
    
    $
    (0.01
    )
    
    
    ($0.14
    )Weighted average shares outstanding:Basic
    
    
    19,871,000
    
    
    
    18,434,000
    
    
    
    19,900,000
    
    
    
    17,734,000Diluted
    
    
    19,871,000
    
    
    
    18,434,000
    
    
    
    19,900,000
    
    
    
    17,734,000
 See notes to unaudited condensed consolidated financial statements.
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 Nine months endedJune 30,2008
    
    2007Rounded in thousands
    
    (unaudited)Cash flows from operating activities:Net income (loss)
    
    $
    (249,000
    )
    
    $
    (2,534,000
    )Adjustments to reconcile net income (loss) to net cash used in operating activities:Depreciation and amortization
    
    
    40,000
    
    
    
    25,000Provision for bad debts
    
    
    (42,000
    )
    
    
    Non-cash compensation to employees and directors
    
    
    225,000
    
    
    
    972,000Non-cash compensation to consultants
    
    
    2,000
    
    
    
    48,000Inventory reserves
    
    
    
    
    
    
    (1,158,000
    )Changes in operating assets and liabilities:Accounts receivable
    
    
    (931,000
    )
    
    
    1,418,000Inventories
    
    
    866,000
    
    
    
    (1,174,000
    )Other current assets
    
    
    (5,000
    )
    
    
    (394,000
    )Accounts payable
    
    
    (469,000
    )
    
    
    943,000Accrued expenses
    
    
    (100,000
    )
    
    
    (2,000
    )Accrued payroll and related taxes
    
    
    65,000
    
    
    
    58,000Net cash used in operating activities
    
    
    (598,000
    )
    
    
    (1,798,000
    )Cash flows from investing activities:Purchases of investments in marketable securities
    
    
    (1,000,000
    )
    
    
    Purchases of equipment, furniture and fixtures
    
    
    
    
    
    
    (208,000
    )Net cash used in investing activities
    
    
    (1,000,000
    )
    
    
    (208,000
    )Cash flows from financing activities:Net proceeds from issuance of common stock, net of expenses
    
    
    
    
    
    
    1,975,000Proceeds in connection with the exercises of warrants
    
    
    70,000
    
    
    
    499,000Proceeds in connection with stock subscription
    
    
    
    
    
    
    650,000Net cash provided by financing activities
    
    
    70,000
    
    
    
    3,124,000Net increase (decrease) in cash
    
    
    (1,528,000
    )
    
    
    1,118,000Cash, beginning of period
    
    
    2,388,000
    
    
    
    99,000Cash, end of period
    
    $
    860,000
    
    
    $
    1,217,000Supplemental cash flow information:Cash paid during the period for income taxes
    
    $
    2,000
    
    
    $
    2,000Cash paid during the period for interest
    
    $
    
    
    
    $
    1,000
 See notes to unaudited condensed consolidated financial statements.
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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (rounded in thousands)
 1. BASIS OF PRESENTATION
   2. RECENTLY ADOPTED AND ISSUED ACCOUNTING PRONOUNCEMENTS
 Recently Adopted:
  Recently Issued:
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Fair Value Measurements
 The Fair Value Option for Financial Assets and
Financial Assets and Liabilities  Including an Amendment of FASB Statement No. 115 Accounting for Certain Investments in Debt and Equity Securities,
 non-controlling
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3. ACCOUNTING POLICY FOR INVESTMENTS IN MARKETABLE SECURITIES
    4. REVENUE RECOGNITION
  5. LOSS PER SHARE
  6. INVENTORIES
  June 30,
    
    September 30,2008
    
    2007(unaudited)Raw materials
    
    $
    936,000
    
    
    $
    805,000Work in process
    
    
    268,000
    
    
    
    228,000Finished goods
    
    
    565,000
    
    
    
    1,602,000$
    1,769,000
    
    
    $
    2,635,000
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7. USE OF ESTIMATES
  8. STOCK BASED COMPENSATION
 Stock Options Accounting for Stock-Based
Compensation,
    For the Nine MonthsEnded June 30,2008
    
    2007Risk-free interest rate
    
    
    3.02% - 4.16%
    
    
    
    4.60% - 4.87%Expected life (in years)
    
    
    4
    
    
    
    4Dividend yield
    
    
    0.0%
    
    
    
    0.0%Expected volatility
    
    
    100% - 105%
    
    
    
    98% - 111%Weighted-average volatility
    
    
    102%
    
    
    
    104%
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WeightedWeighted
    
    
    AverageStock
    
    
    Average
    
    
    Contractual
    
    
    AggregateOptions
    
    
    Exercise Price
    
    
    Term (years)
    
    
    Intrinsic Value *Outstanding at October 1, 2007
    
    
    1,988,000
    
    
    $
    2.52
    
    
    
    3.75Granted
    
    
    75,000
    
    
    $
    1.75
    
    
    
    4.93Exercised
    
    
    
    
    
    
    
    
    
    
    Forfeited or Expired
    
    
    (25,000
    )
    
    $
    2.02
    
    
    
    Outstanding at June 30, 2008
    
    
    2,038,000
    
    
    $
    2.50
    
    
    
    3.04
    
    
    $
    159,000Exercisable at June 30, 2008
    
    
    1,543,000
    
    
    $
    2.56
    
    
    
    2.68
    
    
    $
    159,000
 
 *
    
    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 $1.00
at June 30, 2008.  Weighted AverageGrant-DateStock Options
    
    
    Fair ValueNon-vested at October 1, 2007
    
    
    699,000
    
    
    $
    1.72Granted
    
    
    75,000
    
    
    $
    1.25Forfeited or Expired
    
    
    (25,000
    )
    
    $
    1.47Vested
    
    
    (254,000
    )
    
    $
    1.69Non-vested at June 30, 2008
    
    
    495,000
    
    
    $
    1.27
   Stock warrants 
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9. INCOME TAXES
  Accounting for Income Taxes,
  10. COMMITMENTS AND CONTINGENCIES
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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 June 30, 2008 compared to the three months ended June 30, 2007
  Revenues:
 Cost of Goods and Gross Profit:
  Selling, General and Administrative:
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Engineering, Research & Development:
 Net Income (Loss):
 Nine months ended June 30, 2008 compared to the nine months ended June 30, 2007
 Revenues:
 Cost of Goods and Gross Profit:
  Selling, General and Administrative:
 Engineering, Research & Development:
 Net Income (Loss):
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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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  (1)
    
    The shareholders voted on a cumulative basis for 4 directors, each to serve
for a term of one year. Each nominee received the following votes:
 Name of Nominee
    
    Votes For
    
    Votes Against
    
    AbstainAlan Magerman
    
    
    15,910,430
    
    
    
    961,899
    
    
    
    307,875Jeffrey Kennedy
    
    
    15,859,280
    
    
    
    1,013,049
    
    
    
    307,875Robert Petersen
    
    
    15,209,546
    
    
    
    1,662,783
    
    
    
    307,875Robert Buie
    
    
    15,838,780
    
    
    
    1,033,549
    
    
    
    307,875
 (2)
    
    The shareholders voted for the ratification of the appointment of Singer
Lewak Greenbaum & Goldstein LLP as our independent auditors for our fiscal year ending
September 30, 2008. Votes cast were as follows:
 Votes For
    
    
    16,792,528Votes Against
    
    
    161,616Abstain
    
    
    226,058
 
 ITEM 5. OTHER INFORMATION
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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:  August 12, 2008
    By:
    /s/ Charles W. HunterCharles W. HunterChief Executive OfficerDate:  August 12, 2008
    By:
    /s/ Richard S. KayRichard S. KayChief Financial Officer 16