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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 
 FORM
10-KSB/A
 Amendment No.1
 
 þ
    
    ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended September 30, 2006
 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) 448-9700
   þ o
 o
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REASON FOR AMENDMENT
      STATEMENT OF OPERATIONS DATA (in 000s)Year ended
    
    
    
    
    
    Year endedSeptember 30, 2005
    
    
    
    
    
    September 30, 2005(As previously reported)
    
    Adjustment
    
    (As Restated)Net loss
    
    $
    (5,004
    )
    
    $
    (306
    )
    
    $
    (5,310
    )Net loss per share:Basic and diluted
    
    $
    (.33
    )
    
    $
    (.02
    )
    
    $
    (.35
    )
 BALANCE SHEET DATA (in 000s)September 30, 2006As Previously Reported
    
    
    As RestatedShareholders Equity:Preferred shares
    
    
    
    
    
    
    Common shares
    
    $
    17
    
    
    $
    17Additional paid-in capital
    
    
    17,312
    
    
    
    17,618Accumulated deficit
    
    
    (13,973
    )
    
    
    (14,279
    )3,356
    
    
    
    3,356Less treasury stock, at cost
    
    
    (306
    )
    
    
    (306
    )Less subscription receivable
    
    
    (650
    )
    
    
    (650
    )Total Shareholders Equity
    
    $
    2,400
    
    
    $
    2,400
   2




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##### 



TABLE OF CONTENTS
 PART IITEM 1. DESCRIPTION OF BUSINESSITEM 2. DESCRIPTION OF PROPERTYITEM 3. LEGAL PROCEEDINGSITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERSPART IIITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERSITEM 6. MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONITEM 7. FINANCIAL STATEMENTSITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSUREITEM 8A. CONTROLS AND PROCEDURESITEM 8B. OTHER INFORMATIONPART IIIITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACTITEM 10. EXECUTIVE COMPENSATIONITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERSITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONSITEM 13. EXHIBITSITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICESEXHIBIT 23.1EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1EXHIBIT 32.2
  3




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Introductory Comment
  Forward-Looking Statements
  4




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PART I
 
 ITEM 1. DESCRIPTION OF BUSINESS
 Overview
     History
    Our Products
  5




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NightHunter
 NightHunterII
 NightHunterext
  SuperVision
 The Markets
  Military Forces, of the United States and Foreign Allies
   U.S. Department of Homeland Security
  6




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U.S. Law Enforcement and Fire, Search & Rescue
  Sales & Marketing
        Manufacturing
  7




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Competition
   Regulation
  Intellectual Property
  8




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Research and Development
    Employees
  
 ITEM 2. DESCRIPTION OF PROPERTY
  
 ITEM 3. LEGAL PROCEEDINGS
    9




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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 PART II
 
 ITEM 5. Market for Common Equity and Related Stockholder Matters
  Year ended September 30, 2006
    
    High
    
    LowFirst Quarter
    
    
    2.60
    
    
    
    1.52Second Quarter
    
    
    2.50
    
    
    
    1.37Third Quarter
    
    
    2.45
    
    
    
    1.42Fourth Quarter
    
    
    2.18
    
    
    
    1.40
 Year ended September 30, 2005
    
    High
    
    LowFirst Quarter
    
    
    12.25
    
    
    
    3.25Second Quarter
    
    
    8.00
    
    
    
    4.00Third Quarter
    
    
    5.00
    
    
    
    2.05Fourth Quarter
    
    
    3.70
    
    
    
    1.60
  Dividends
  Repurchase of Securities
  Recent Sales of Unregistered Securities
  Equity Compensation Plan Information
  10




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Number of securities
    
    
    
    
    
    Number of securitiesto be issued upon
    
    Weighted-average
    
    remaining available forexercise of
    
    exercise price of
    
    future issuance underoutstanding options,
    
    outstanding options,
    
    equity compensation plansPlan Category
    
    and rights
    
    and rights
    
    (excluding column (a))(a)
    
    (b)
    
    (c)Equity compensation plans approved by security holders
    
    
    1,726,000
    
    
    $
    2.50
    
    
    
    769,000Equity compensation plans not approved by security holders
    
    
    938,000
    
    
    $
    1.79
    
    
    
    Total
    
    
    2,664,000
    
    
    $
    2.25
    
    
    
    769,000
    
 ITEM 6. Managements Discussion and Analysis or Plan of Operation
 Forward-Looking Statements
  Overview
  11




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How We Generate Revenue
    Trends in Our Business
  12




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Critical Accounting Policies and Estimates
  Accounts Receivable
 Tax Valuation Allowance
 Inventory Valuation
  Results of Operations
  Revenues:
  13




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Cost of Goods and Gross Profit:
   Selling, General and Administrative:
  Engineering, Research & Development:
 14




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Other Income / Expense:
 Provision for Income Taxes:
 15




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Liquidity and Capital Resources
         -
 16




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2011Contractual Obligations
    
    Total
    
    2007
    
    2008
    
    2009
    
    2010
    
    and thereafterLong-Term Office Lease
    
    $
    228,000
    
    
    $
    108,000
    
    
    $
    111,000
    
    
    $
    9,000
    
    
    
    
    
    
    
    
    RISK FACTORS
 An investment in our common stock is subject to a high degree of risk. The risks described
below should be carefully considered, as well as the other information contained in this annual
report and in the documents incorporated herein by reference. If any of the following risks
actually occurs, our business, financial condition, results of operations and business prospects
could be materially and adversely affected. In such event, the trading price of our common stock
would likely decline.
 Risks Related to Our Business
 We have a limited operating history, which makes it difficult for investors to evaluate our
business prospects.
  Fluctuations in our quarterly and annual operating results make it difficult to assure future
positive cash flows from operations.
  The loss of any one of our major customers would have an adverse effect on our revenue.
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The loss of contracts with U.S. government agencies would adversely affect our revenue.
  Potential customers may prefer our competitors technology and products.
   Because we have limited marketing and sales experience in the illumination products marketplace, we
may be unable to compete successfully against other companies that have a history and track record
in the high-intensity lighting marketplace.
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The loss of any of our key personnel could adversely affect our business.
  The interests of our current stockholders will be diluted if we seek additional equity financing in
the future, and any debt financing that we seek in the future will expose us to the risk of default
and insolvency.
 .
 We are subject to government regulation which may require us to obtain additional licenses and
could limit our ability to sell our products outside the United States.
  We may experience production delays if suppliers fail to deliver materials to us, which could
reduce our revenue.
  Our operations involve evolving products and technological change, which could make our products
obsolete.
  We may not have adequate protection of our intellectual property, which could result in a reduction
in our revenue if our competitors are able to use our intellectual property or if we lose our
rights to the NighthunterII or SuperVision patent application.
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Because we currently only have a single line of products, any delay in our ability to market, sell
or ship these existing products would adversely affect our revenue.
   Because we depend on a single manufacturer to make our NightHunterII products, any failure by the
manufacturer to honor its obligations to us will impair our ability to deliver our products to
customers.
 -
  Risks Related to Our Common Stock
 Because our stock is thinly traded, you may be unable to sell your shares at an adequate price or
at all
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If securities or industry analysts do not publish research reports about our business or if they
downgrade our stock, the price of our common stock could decline.
  Anti-takeover provisions in our articles of incorporation could adversely affect the value of our
common stock.
  The future issuance of additional common and preferred stock could dilute existing stockholders.
   
    
    exercising voting, redemption and conversion rights to the detriment of the holders of common stock;
    
    receiving preferences over the holders of common stock or surplus funds in the event of our dissolution or liquidation;
    
    delaying, deferring or preventing a change in control of our company; and
    
    discouraging bids for our common stock.
 There has been, and may continue to be, significant volatility in our stock price and, as a result,
you may be unable to sell your shares for more than your purchase price.
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We do not plan to pay any cash dividends on our common stock.
  The exercise of outstanding stock options and warrants would dilute the ownership interests of our
existing stockholders and could cause our stock price to decline.
  Future sales of common stock by our existing stockholders and option and warrant holders could
cause our stock price to decline.
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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
 XENONICS HOLDINGS, INC.
 Report of Independent Registered Public Accounting Firm
    
    
    24Consolidated Financial Statements:Balance Sheet as of September 30, 2006
    
    
    25Statements of Operations for the years ended September 30, 2006 and 2005
    
    
    26Statements of Shareholders Equity for the years ended September 30, 2006 and 2005
    
    
    27Statements of Cash Flows for the years ended September 30, 2006 and 2005
    
    
    28Notes to Consolidated Financial Statements
    
    
    29
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
       
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CONSOLIDATED BALANCE SHEET
 September 30,2006(As Restated)in thousands, except per share amounts
    
    (See Note 14)AssetsCurrent assets:Cash
    
    $
    99Accounts receivable, net of allowance for doubtful accounts of $0
    
    
    2,194Inventories, net
    
    
    605Other current assets
    
    
    96Total Current Assets
    
    
    2,994Equipment, furniture and fixtures at cost, less accumulated depreciation of $83
    
    
    46Other non-current assets
    
    
    25Total Assets
    
    $
    3,065Liabilities and Shareholders EquityCurrent liabilities:Accounts payable and accrued expense
    
    $
    561Accrued payroll and related taxes
    
    
    96Other current liabilities
    
    
    8Total Current Liabilities
    
    
    665Commitments and contingencies (Note 11)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, 16,904 shares issued and 16,791 shares outstanding
    
    
    17Additional paid-in capital
    
    
    17,618Accumulated deficit
    
    
    (14,279
    )3,356Less treasury stock, at cost, 113 shares
    
    
    (306
    )Less subscription receivable
    
    
    (650
    )Total Shareholders Equity
    
    
    2,400Total Liabilities and Shareholders Equity
    
    $
    3,065
 The accompanying notes are an integral part of these consolidated financial statements.
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CONSOLIDATED STATEMENTS OF OPERATIONS
 Year endedSeptember 30,2006
    
    2005(As Restated)in thousands, except per share amounts
    
    
    
    
    
    (See Note 14)Revenue
    
    $
    4,833
    
    
    $
    4,434Cost of goods sold (including write down of excess inventory of $1,953 in 2005)
    
    
    2,048
    
    
    
    4,431Gross profit
    
    
    2,785
    
    
    
    3Selling, general and administrative
    
    
    3,714
    
    
    
    4,884Engineering, research and development
    
    
    576
    
    
    
    504Loss from operations
    
    
    (1,505
    )
    
    
    (5,385
    )Other expense, net:Interest income
    
    
    26
    
    
    
    22Interest expense
    
    
    (4
    )
    
    
    (36
    )Other (expense) / income
    
    
    (3
    )
    
    
    6Loss before provision for income taxes
    
    
    (1,486
    )
    
    
    (5,393
    )Income tax / (benefit) provision
    
    
    2
    
    
    
    (49
    )Loss before minority interest
    
    $
    (1,488
    )
    
    $
    (5,344
    )Minority interest
    
    
    
    
    
    
    (34
    )Net loss
    
    $
    (1,488
    )
    
    $
    (5,310
    )Net loss per share:Basic and diluted
    
    $
    (.09
    )
    
    $
    (.35
    )Weighted average shares outstandingBasic and diluted
    
    
    16,044
    
    
    
    14,963
 The accompanying notes are an integral part of these consolidated financial statements.
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CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
 AdditionalCommon Stock
    
    Treasury Stock
    
    Paid-In
    
    Accumulated
    
    SubscriptionShares
    
    Amount
    
    Shares
    
    Amount
    
    Capital
    
    Deficit
    
    Receivable
    
    Total(As Restated)
    
    (As Restated)
    
    
    
    
    
    (As Restated)in thousands
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (See Note 14)
    
    (See Note 14)
    
    
    
    
    
    (See Note 14)Balance at
September 30, 2004
    
    
    14,167
    
    
    $
    14
    
    
    
    
    
    
    
    
    
    
    $
    10,540
    
    
    $
    (7,481
    )
    
    
    
    
    
    $
    3,073Options exercised
    
    
    495
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    123
    
    
    
    
    
    
    
    
    
    
    
    124Warrants exercised
    
    
    364
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    248
    
    
    
    
    
    
    
    
    
    
    
    248Issuance of common
stock for services
    
    
    63
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    110
    
    
    
    
    
    
    
    
    
    
    
    110Issuance of common
stock in private
placement, net of
offering costs of
$321
    
    
    500
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    2,178
    
    
    
    
    
    
    
    
    
    
    
    2,179Conversion of
accrued royalties to
common stock
    
    
    97
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    400
    
    
    
    
    
    
    
    
    
    
    
    400Litigation settlement
    
    
    
    
    
    
    
    

    
    
   (113
    )

    
 
(306
    )

    
    
 306
    
    
    
 
    

    
    
 Compensation charge
for stock options
issued to employees
and directors
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    614
    
    
    
    
    
    
    
    
    
    
    
    614Issuance of warrants
for services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    328
    
    
    
    
    
    
    
    
    
    
    
    328Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,310
    )
    
    
    
    
    
    
    (5,310
    )Balance at September
30, 2005
    
    
    15,686
    
    
    $
    16
    
    
    
    (113
    )
    
    $
    (306
    )
    
    $
    14,847
    
    
    $
    (12,791
    )
    
    
    
    
    
    $
    1,766Issuance of common
stock in private
placement, net of
offering costs of
$115
    
    
    1,000
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    1,534
    
    
    
    
    
    
    
    (650
    )
    
    
    885Warrants exercised
    
    
    218
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    136
    
    
    
    
    
    
    
    
    
    
    
    136Compensation charge
for stock options
issued to employees
and directors
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    560
    
    
    
    
    
    
    
    
    
    
    
    560Issuance of warrants
for services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    541
    
    
    
    
    
    
    
    
    
    
    
    541Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,488
    )
    
    
    
    
    
    
    (1,488
    )Balance at September
30, 2006
    
    
    16,904
    
    
    $
    17
    
    
    
    (113
    )
    
    $
    (306
    )
    
    $
    17,618
    
    
    $
    (14,279
    )
    
    $
    (650
    )
    
    $
    2,400
 The accompanying notes are an integral part of these consolidated financial statements.
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CONSOLIDATED STATEMENTS OF CASH FLOWS
 Year endedSeptember 30,2006
    
    2005in thousands
    
    
    
    
    
    (As Restated)(See Note 14)Cash flows from operating activities:Net loss
    
    $
    (1,488
    )
    
    $
    (5,310
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation
    
    
    13
    
    
    
    11Compensation charge for stock options issued to employees and directors
    
    
    560
    
    
    
    614Issuance of warrants for services
    
    
    541
    
    
    
    328Write down of excess inventory
    
    
    
    
    
    
    1,953Issuance of common stock for services
    
    
    
    
    
    
    110Minority interest in net loss of subsidiary
    
    
    
    
    
    
    (34
    )Changes in operating assets and liabilities:Accounts receivable
    
    
    (1,981
    )
    
    
    40Inventories
    
    
    601
    
    
    
    (2,237
    )Other current and non-current assets
    
    
    (14
    )
    
    
    106Accounts payable and accrued expense
    
    
    (47
    )
    
    
    (518
    )Accrued payroll and related taxes
    
    
    10
    
    
    
    (7
    )Other current liabilities
    
    
    2
    
    
    
    6Net cash used in operating activities
    
    
    (1,803
    )
    
    
    (4,938
    )Cash flows from investing activities:Purchases of equipment, furniture and fixtures
    
    
    (9
    )
    
    
    (26
    )Net cash used for investing activities
    
    
    (9
    )
    
    
    (26
    )Cash flows from financing activities:Proceeds from short-term borrowings
    
    
    
    
    
    
    1,305Repayment of short-term borrowings
    
    
    
    
    
    
    (1,305
    )Net proceeds from issuance of common stock net of expenses
    
    
    885
    
    
    
    2,179Proceeds in connection with the exercise of options and warrants
    
    
    136
    
    
    
    372Proceeds in connection with the exercise of warrants in subsidiary
    
    
    
    
    
    
    34Net cash provided by financing activities
    
    
    1,021
    
    
    
    2,585Decrease in cash
    
    
    (791
    )
    
    
    (2,379
    )Cash, beginning of period
    
    
    890
    
    
    
    3,269Cash, end of period
    
    $
    99
    
    
    $
    890Supplemental cash flow information:Cash paid during the year for income taxes
    
    $
    2
    
    
    $
    Cash paid during the year for interest
    
    $
    4
    
    
    $
    36Noncash transactions:Conversion of accrued royalties to common stock
    
    
    
    
    
    $
    400Subscription receivable
    
    $
    650
    
    
    
    Litigation settlement  return of 112,500 shares of common stock
    
    
    
    
    
    $
    306
 The accompanying notes are an integral part of these consolidated financial statements
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands, except for per share amounts)
 1. OPERATIONS AND OTHER ORGANIZATIONAL MATTERS
     2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Principles of Consolidation
 Use of Estimates
 Equipment and Leasehold Improvements 
 Long-Lived Assets
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Fair Value Of Financial Instruments 
 Inventories
 Revenue Recognition
 Advertising Costs
 Industry Segment And Geographical Data -
  Year endedSeptember 30,2006
    
    2005US Military
    
    
    96
    %
    
    
    91
    %US Border Patrol
    
    
    
    %
    
    
    3
    %International
    
    
    2
    %
    
    
    1
    %Other
    
    
    2
    %
    
    
    5
    %100
    %
    
    
    100
    %
 Cost of Goods Sold -
 Income Taxes
 Loss Per Common Share -
 30




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For the year ended2006
    
    2005Shares outstanding, beginning
    
    
    15,573
    
    
    
    14,167Weighted average shares issued
    
    
    471
    
    
    
    796Weighted average shares outstanding  Basic
    
    
    16,044
    
    
    
    14,963Effect of dilutive securities (stock options and warrants)
    
    
    
    
    
    
    Weighted average shares outstanding  diluted
    
    
    16,044
    
    
    
    14,963
  2006
    
    2005Stock options and warrants
    
    
    5,154
    
    
    
    4,281
 Research and Development
 Stock Options Accounting for Stock-Based Compensation
 Major Concentrations 
   Recent Accounting Pronouncements
  Accounting Changes ).
 Accounting for Uncertainty in Income
Taxes Accounting for Income Taxes
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Fair Value Measurements
 Employers Accounting for Defined Benefit
Pension and Other Postretirement Benefit Plans
 3. FIXED ASSETS
  Estimated
    
    
    September 30,Useful Lives
    
    
    2006Computer equipment
    
    
    5
    
    
    $
    86Computer software
    
    
    5
    
    
    
    23Leasehold improvement
    
    
    7
    
    
    
    20129Less: accumulated depreciation and amortization
    
    
    
    
    
    
    83$
    46
 4. INVENTORIES
  September 30,2006Raw materials
    
    $
    145Work in process
    
    
    301Finished goods
    
    
    1,330Reserve for obsolescence
    
    
    (1,171
    )$
    605
 5. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
  September 30,2006Accounts payable
    
    $
    436Accrued expenses
    
    
    125$
    561
 6. SHAREHOLDERS EQUITY
  32




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##### Table of Contents



Common Stock
 ,
    7. INCOME TAXES
  Year endedSeptember 30,2006
    
    
    2005Current provision:Federal
    
    $
    
    
    
    $
    28State
    
    
    2
    
    
    
    (77
    )$
    2
    
    
    $
    (49
    )
 33




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##### Table of Contents



September 30,2006
    
    
    2005Inventory reserve
    
    
    466
    
    
    
    782Stock compensation expense
    
    
    468
    
    
    
    256Warrant expense
    
    
    369
    
    
    
    154State taxes
    
    
    1
    
    
    
    Accumulated depreciation / amortization
    
    
    (21
    )
    
    
    (17
    )R&D credit
    
    
    237
    
    
    
    147Other
    
    
    56
    
    
    
    50Net operating loss carryforwards
    
    
    3,435
    
    
    
    2,9515,011
    
    
    
    4,323Valuation allowance
    
    
    (5,011
    )
    
    
    (4,323
    )Net deferred tax asset
    
    $
    
    
    
    $
    
    Year endedSeptember 30,2006
    
    2005Federal statutory rate
    
    
    (34.0
    %)
    
    
    (34.0
    %)State income taxes, net of federal income tax benefit
    
    
    (5.8
    %)
    
    
    (5.7
    %)Change in valuation allowance
    
    
    46.2
    %
    
    
    41.7
    %R&D credit carryforward
    
    
    (6.0
    %)
    
    
    (2.9
    %)Other
    
    
    (0.3
    %)
    
    
    (0.1
    %)0.1
    %
    
    
    (1.0
    %)
 8. MINORITY INTEREST
  9 . SIGNIFICANT CONTRACTS
    34




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##### Table of Contents



10. SAVINGS PLAN
  11. COMMITMENTS AND CONTINGENCIES
 Leases
  Factoring 
 Purchase Agreement with PerkinElmer, Inc . 
 Consulting Agreements
    35




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##### Table of Contents



Employment Agreements 
  Litigation
  12. STOCK OPTIONS AND WARRANTS
  2003 Stock Option Plan
 36




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##### Table of Contents



2004 Stock Option Plan 
       37




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##### Table of Contents



Year ended September 30,2006
    
    
    
    
    
    2005Weighted
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    AverageOptions
    
    Exercise Price
    
    Options
    
    Exercise PriceOutstanding-beginning of period
    
    
    1,635
    
    
    $
    2.563
    
    
    
    1,245
    
    
    $
    0.958Granted
    
    
    106
    
    
    $
    1.722
    
    
    
    1,040
    
    
    $
    3.408Exercised
    
    
    
    
    
    
    
    
    
    
    (495
    )
    
    $
    0.250Forfeited
    
    
    (15
    )
    
    $
    3.750
    
    
    
    (155
    )
    
    $
    2.726Outstanding-end of period
    
    
    1,726
    
    
    $
    2.501
    
    
    
    1,635
    
    
    $
    2.563Exercisable at end of period
    
    
    982
    
    
    $
    2.083
    
    
    
    680
    
    
    $
    1.347Weighted-average fair value of options granted during the period
    
    
    
    
    
    $
    1.125
    
    
    
    
    
    
    $
    1.550
  Options Outstanding
    
    Options Exercisableat September 30, 2006
    
    at September 30, 2006WeightedAverage
    
    Weighted-
    
    
    
    
    
    Weighted-Range of
    
    
    
    
    
    Remaining
    
    Average
    
    Number
    
    AverageExercise
    
    Number
    
    Contractual
    
    Exercise
    
    Vested and
    
    ExercisePrices
    
    Outstanding
    
    Life (Years)
    
    Price
    
    Exercisable
    
    Price$0.250 - $1.000
    
    
    545
    
    
    
    5.50
    
    
    $
    0.709
    
    
    
    545
    
    
    $
    0.709$1.870 - $2.850
    
    
    331
    
    
    
    3.86
    
    
    $
    1.882
    
    
    
    37
    
    
    $
    2.282$3.500 - $3.800
    
    
    805
    
    
    
    3.40
    
    
    $
    3.779
    
    
    
    370
    
    
    $
    3.778$5.750 - $6.000
    
    
    45
    
    
    
    4.00
    
    
    $
    5.917
    
    
    
    30
    
    
    $
    5.9171,726
    
    
    
    4.17
    
    
    $
    2.501
    
    
    
    982
    
    
    $
    2.083
 Stock Warrants 
     ,
  38




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##### Table of Contents



Year ended September 30,2006
    
    
    
    
    
    2005Weighted
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    AverageWarrants
    
    Exercise Price
    
    Warrants
    
    Exercise PriceOutstanding-beginning of period
    
    
    2,646
    
    
    $
    1.193
    
    
    
    2,522
    
    
    $
    0.894Issued
    
    
    2,313
    
    
    $
    2.065
    
    
    
    488
    
    
    $
    2.359Exercised
    
    
    (218
    )
    
    $
    0.626
    
    
    
    (364
    )
    
    $
    0.683Canceled
    
    
    (1,313
    )
    
    $
    2.000
    
    
    
    
    
    
    
    Outstanding-end of period
    
    
    3,428
    
    
    $
    1.508
    
    
    
    2,646
    
    
    $
    1.193Exercisable-end of period
    
    
    3,178
    
    
    $
    1.375
    
    
    
    2,646
    
    
    $
    1.193
  Warrants Vested and Exercisableat September 30, 2006WeightedAverage
    
    Weighted-Range of
    
    Number
    
    Remaining
    
    AverageExercise
    
    Vested and
    
    Contractual
    
    ExercisePrices
    
    Exercisable
    
    Life (Years)
    
    Price$0.600 - $1.000
    
    
    1,763
    
    
    
    1.79
    
    
    $
    0.702$1.005 - $2.200
    
    
    1,290
    
    
    
    4.27
    
    
    $
    1.808$5.050 - $8.000
    
    
    125
    
    
    
    2.91
    
    
    $
    6.4103,178
    
    
    
    2.84
    
    
    $
    1.375
 13. SUBSEQUENT EVENTS
   39




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##### Table of Contents



14. RESTATEMENT
     STATEMENT OF OPERATIONS DATAYear ended
    
    
    
    
    
    Year endedSeptember 30, 2005
    
    
    
    
    
    September 30, 2005(As previously reported)
    
    Adjustment
    
    (As Restated)Net loss
    
    $
    (5,004
    )
    
    $
    (306
    )
    
    $
    (5,310
    )Net loss per share:Basic and diluted
    
    $
    (.33
    )
    
    $
    (.02
    )
    
    $
    (.35
    )
 BALANCE SHEET DATASeptember 30, 2006Shareholders Equity:
    
    As Previously Reported
    
    As RestatedPreferred shares
    
    
    
    
    
    
    Common shares
    
    $
    17
    
    
    $
    17Additional paid-in capital
    
    
    17,312
    
    
    
    17,618Accumulated deficit
    
    
    (13,973
    )
    
    
    (14,279
    )3,356
    
    
    
    3,356Less treasury stock, at cost
    
    
    (306
    )
    
    
    (306
    )Less subscription receivable
    
    
    (650
    )
    
    
    (650
    )Total Shareholders Equity
    
    $
    2,400
    
    
    $
    2,400
 
 ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
  
 ITEM 8A. CONTROLS AND PROCEDURES
  40




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##### Table of Contents



ITEM 8B. OTHER INFORMATION
  41




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##### Table of Contents



PART III
 
 ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION
16(a) OF THE EXCHANGE ACT
  
 ITEM 10. EXECUTIVE COMPENSATION
  
 ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
  
 ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
  42




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##### Table of Contents



ITEM 13. EXHIBITS
 ExhibitNumber
    
    Description2.1
    
    Agreement and Plan of Reorganization between Xenonics, Inc. and
Digital Home Theater Systems, Inc., dated July 23, 2003
(incorporated by reference to Exhibit 2.1 to the Registration
Statement on Form SB-2 of Xenonics Holdings, Inc., File No.
333-115324, filed on May 10, 2004).3.1
    
    Restated Articles of Incorporation of Xenonics Holdings, Inc.
(incorporated by reference to Exhibit 3.1 to the Registration
Statement on Form SB-2 of Xenonics Holdings, Inc., File No.
333-123221, filed on March 9, 2005).3.2
    
    Bylaws of Xenonics Holdings, Inc., formerly known as Digital Home
Theater Systems, Inc. (incorporated by reference to Exhibit 3.3 to
Amendment No. 1 to the Registration Statement on Form SB-2 of
Xenonics Holdings, Inc., File No. 333-115324, filed on June 30,
2004).10.1
    
    Lease between Xenonics, Inc. and SM/CT Partners, L.P., dated
August 16, 2000 (incorporated by reference to Exhibit 10.3 to
Amendment No. 1 to the Registration Statement on Form SB-2 of
Xenonics Holdings, Inc., File No. 333-115324, filed on June 30,
2004).10.2
    
    1st Amendment to Lease Agreement, dated July 21, 2004, between Bay
West Equities Carlsbad Research Center, LLC and Xenonics, Inc.
(incorporated by reference to Exhibit 10.11 to Amendment No. 3 to
the Registration Statement on Form SB-2 of Xenonics Holdings,
Inc., File No. 333-115324, filed on September 2, 2004).10.3
    
    PerkinElmer Manufacturing Terms and Conditions Agreement, dated as
of January 6, 2003, between Xenonics, Inc. and PerkinElmer
Electronics, Inc. (incorporated by reference to Exhibit 10.7 to
Amendment No. 4 to the Registration Statement on Form SB-2 of
Xenonics Holdings, Inc., File No. 333-115324, filed on September
21, 2004; the Commission has granted confidential treatment to
selected portions of this document).10.4
    
    Agreement for the License and Transfer of Intellectual Property
Rights from Lightrays, Ltd. to Xenonics, Inc., dated March 27,
1997, between Xenonics, Inc. and Lightrays, Ltd. (incorporated by
reference to Exhibit 10.9 to Amendment No. 2 to the Registration
Statement on Form SB-2 of Xenonics Holdings, Inc., File No.
333-115324, filed on August 16, 2004).10.5
    
    Amendment to Agreement for the License and Transfer of
Intellectual Property Rights, dated April 23, 1998, between
Xenonics, Inc. and Lightrays, Ltd. (incorporated by reference to
Exhibit 10.10 to Amendment No. 2 to the Registration Statement on
Form SB-2 of Xenonics Holdings, Inc., File No. 333-115324, filed
on August 16, 2004).10.6
    
    Settlement Agreement and Mutual Release, dated as of December 3,
2004, among Xenonics Holdings, Inc., Xenonics, Inc. and Lightrays,
Ltd. (incorporated by reference to Exhibit 10.1 to the Current
Report on Form 8-K of Xenonics Holdings, Inc. filed on December 8,
2004).10.7
    
    Engagement letter, dated March 1, 2004, as amended by letters
dated April 12, 2004 and May 18, 2004, between Bryant Park
Capital, Inc. and Xenonics Holdings, Inc. (incorporated by
reference to Exhibit 4.6 to Amendment No. 1 to the Registration
Statement on Form SB-2 of Xenonics Holdings, Inc., File No.
333-115324, filed on June 30, 2004).10.8
    
    Form of Indemnification Agreement entered into between Xenonics
Holdings, Inc. and its directors and certain officers
(incorporated by reference to Exhibit 10.1 to the Registration
Statement on Form SB-2 of Xenonics Holdings, Inc., File No.
333-115324, filed on May 10, 2004).*10.9
    
    Employment Agreement between Xenonics, Inc. and Alan P. Magerman,
dated January 1, 2003 (incorporated by reference to Exhibit 10.5
to the Registration Statement on Form SB-2 of Xenonics Holdings,
Inc., File No. 333-115324, filed on May 10, 2004).*10.10
    
    Amendment dated April 15, 2005 to Employment Agreement between
Xenonics, Inc. and Alan P. Magerman (incorporated by reference to
Exhibit 99.1 to the Current Report on Form 8-K of Xenonics
Holdings, Inc. filed on April 21, 2005).*10.11
    
    Employment Agreement between Xenonics, Inc. and Jeffrey Kennedy,
dated January 1, 2003 (incorporated by reference to Exhibit 10.6
to the Registration Statement on Form SB-2 of Xenonics Holdings,
Inc., File No. 333-115324, filed on May 10, 2004).*10.12
    
    2003 Stock Option Plan of Xenonics Holdings, Inc. (incorporated by
reference to Exhibit 10.4 to Amendment No. 1 to the Registration
Statement on Form SB-2 of Xenonics Holdings, Inc., File No.
333-115324, filed on June 30, 2004).*
 43




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##### Table of Contents



ExhibitNumber
    
    Description10.13
    
    Form of Option Agreement for the 2003 Stock Option Plan
(incorporated by reference to Exhibit 4.3 to the Registration
Statement on Form S-8 of Xenonics Holdings, Inc., File No.
333-125468, filed on June 3, 2005).*10.14
    
    2004 Stock Incentive Plan of Xenonics Holdings, Inc (incorporated
by reference to Exhibit 10.12 to Post-Effective Amendment No. 1 to
the Registration Statement on Form SB-2 of Xenonics Holdings,
Inc., File No. 333-115324, filed on February 17, 2005).*10.15
    
    Form of Option Agreement for the 2004 Stock Incentive Plan
(incorporated by reference to Exhibit 10.13 to the Registration
Statement on Form SB-2 of Xenonics Holdings, Inc., File No.
333-123221, filed on March 9, 2005).*10.16
    
    Form of Warrant Certificate of Xenonics Holdings, Inc.
(incorporated by reference to Exhibit 4.2 to the Registration
Statement on Form SB-2 of Xenonics Holdings, Inc., File No.
333-115324, filed on May 10, 2004).10.17
    
    Form of Participating Dealers Warrant Agreement, entered into by
Xenonics Holdings, Inc. and certain participating broker-dealers
on July 23, 2003 (incorporated by reference to Exhibit 4.3 to the
Registration Statement on Form SB-2 of Xenonics Holdings, Inc.,
File No. 333-115324, filed on May 10, 2004).10.18
    
    Form of Stock Purchase Agreement entered into by Xenonics
Holdings, Inc. and certain investors in March 2004 in connection
with the purchase of common stock (incorporated by reference to
Exhibit 10.2 to the Registration Statement on Form SB-2 of
Xenonics Holdings, Inc., File No. 333-115324, filed on May 10,
2004).10.19
    
    Form of Warrant to Purchase Common Stock of Xenonics Holdings,
Inc., dated April 26, 2004, issued to White Rock Capital Partners,
L.P. (incorporated by reference to Exhibit 4.4 to the Registration
Statement on Form SB-2 of Xenonics Holdings, Inc., File No.
333-115324, filed on May 10, 2004).10.20
    
    Form of Warrant to Purchase Common Stock of Xenonics Holdings,
Inc., dated April 26, 2004, issued to Texrock, Ltd. (incorporated
by reference to Exhibit 4.5 to the Registration Statement on Form
SB-2 of Xenonics Holdings, Inc., File No. 333-115324, filed on May
10, 2004).10.21
    
    Warrant Certificate, dated July 1, 2004, for the purchase of
25,000 shares of Xenonics Holdings, Inc. common stock, issued to
Neil G. Berkman Associates (incorporated by reference to Exhibit
4.7 to Amendment No. 3 to the Registration Statement on Form SB-2
of Xenonics Holdings, Inc., File No. 333-115324, filed on
September 2, 2004).10.22
    
    Form of Selling Stockholder and Securities Purchase Agreement,
dated as of January 17, 2005, entered into by and among Xenonics
Holdings, Inc. and the Selling Stockholders and the Investors
named therein (incorporated by reference to Exhibit 10.1 to the
Current Report on Form 8-K of Xenonics Holdings, Inc. filed on
January 18, 2005).10.23
    
    Form of Registration Rights Agreement, dated as of January 17,
2005, entered into among Xenonics Holdings, Inc. and the Selling
Stockholders and the Investors named therein (incorporated by
reference to Exhibit 10.2 to the Current Report on Form 8-K of
Xenonics Holdings, Inc. filed on January 18, 2005).10.24
    
    Consulting Agreement, dated as of September 9, 2005 and effective
as of August 9, 2005, between Xenonics Holdings, Inc. and Patriot
Associates LLC (incorporated by reference to Exhibit 10.1 to the
Current Report on Form 8-K of Xenonics Holdings, Inc. filed on
September 14, 2005).10.25
    
    Amendment No. 1, dated as of October 19, 2005, Amendment No. 2
dated as of January 17, 2006, and Amendment No. 3 dated as of May
11, 2006, each between Xenonics Holdings, Inc. and Patriot
Associates LLC, to the Consulting Agreement dated as of September
9, 2005, between Xenonics Holdings, Inc. and Patriot Associates
LLC (incorporated by reference to Exhibit 10.1 to the Current
Reports on Form 8-K of Xenonics Holdings, Inc. filed on October
24, 2005, January 17, 2006 and May 17, 2006, respectively).10.26
    
    Letter dated September 29, 2006 from Xenonics Holdings, Inc. to
Patriot Associates LLC, regarding the termination of the
Consulting Agreement dated as of September 9, 2005 between
Xenonics Holdings, Inc. and Patriot Associates, LLC (incorporated
by reference to Exhibit 10.1 to the Current Report on Form 8-K of
Xenonics Holdings, Inc. filed on October 5, 2006).10.27
    
    Warrant, dated September 9, 2005, issued by Xenonics Holdings,
Inc. to Patriot Associates LLC, for the purchase of 437,500 shares
of the common stock of Xenonics Holdings, Inc. (incorporated by
reference to Exhibit 10.2 to the Current Report on Form 8-K of
Xenonics Holdings, Inc. filed on September 14, 2005).
 44




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##### Table of Contents



ExhibitNumber
    
    Description10.28
    
    Registration Rights Agreement, dated as of September 9, 2005, between Xenonics Holdings, Inc. and
Patriot Associates LLC (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K of
Xenonics Holdings, Inc. filed on September 14, 2005).10.29
    
    Securities Purchase and Security Agreement dated as of April 13, 2006 between Xenonics Holdings, Inc.
and The Norman Patriot LLC (incorporated by reference to Exhibit 10.1 to the Current Report on Form
8-K of Xenonics Holdings, Inc. filed on April 19, 2006).10.30
    
    Secured Promissory Note dated April 13, 2006, in the principal amount of $650,000, given by The Norman
Patriot LLC to Xenonics Holdings, Inc. (incorporated by reference to Exhibit 10.2 to the Current
Report on Form 8-K of Xenonics Holdings, Inc. filed on April 19, 2006).10.31
    
    Class A and Class B Warrants, dated April 13, 2006, issued by Xenonics Holdings, Inc. to The Norman
Patriot LLC for the purchase of an aggregate of 500,000 shares of the common stock of Xenonics
Holdings, Inc. (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K of
Xenonics Holdings, Inc. filed on April 19, 2006).10.32
    
    Consulting Agreement dated as of September 5, 2006 between Xenonics Holdings, Inc. and Third Coast
Marketing, LLC (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of
Xenonics Holdings, Inc. filed on September 11, 2006).10.33
    
    Warrant, dated September 5, 2006, issued by Xenonics Holdings, Inc. to Third Coast Marketing, LLC for
the purchase of an aggregate of 500,000 shares of the common stock of Xenonics Holdings, Inc.
(incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K of Xenonics Holdings,
Inc. filed on September 11, 2006).21.1
    
    List of subsidiaries of Xenonics Holdings, Inc. (incorporated by reference to Exhibit 21.1 to the
Registration Statement on Form SB-2 of Xenonics Holdings, Inc., File No. 333-115324, filed on May 10,
2004).23.1
    
    Consent of Eisner LLP.31.1
    
    Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 *
    
    Denotes a management contract or compensatory plan or arrangement in which one or more
directors or executive officers participate. 
 ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
  45




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SIGNATURES
  Xenonics Holdings, Inc.By:
    /s/  Charles HunterDate:  June 20, 2007
    
    Charles HunterChief Executive Officer 46